Today, we’ll look at Cisco Systems (NASDAQ:CSCO). Readers should know that I am not a tech stock guy, and Cisco is a complicated tech company. All I can do is offer a straight-up look at the numbers and rely on what my peers in the financial press think.

Cisco designs, manufactures and sells Internet protocol-based networking and other products related to the communications and information technology industry worldwide. It offers routers that interconnects public and private IP networks for mobile, data, voice and video applications; switching products; application networking services; and home networking products. The company also offers security products; storage area networking products for data center environments; collaboration products to integrate voice, video, data and mobile applications on fixed and mobile networks; video connected home products; and optical networking products.

Cisco’s biggest driving factors, as I see it, are the economy and competition. I might not understand what all that gobbledegook above means in specific terms, but I do know it costs money for the end user — and it can be expensive. So if the economy stinks, so will sales. I also know the high-growth phase for Cisco ended years ago, when the Internet was really rolling out in full force. Now, I suspect it’s mostly about ongoing service of existing systems, replacement products and innovating new technologies.

Let’s look at financials and valuation for Cisco.

I don’t have to understand tech to like the $44.5 billion in cash the company has in its coffers! This is offset by $16.2 billion in debt at a blended interest rate of about 4%. Trailing 12-month free cash flow was $8.9 billion. The company only recently started paying a 1.4% dividend, which it has covered by free cash flow by a factor of 7.

Stock analysts looking out five years on Cisco see annualized earnings growth at a respectable 9.5%. At a stock price of $16.50, on FY 2011 earnings of $1.71, the stock presently trades at a P/E of 9.5. However, if we back out the $5.50 per share in cash the company has, the P/E drops to 6.6.

Conclusion

On a numbers basis, Cisco looks undervalued. It isn’t overpaying on its dividend, which probably is smart because, despite its 15% net margins, the company spends more than $5 billion annually in R&D. It’s a capital-intensive business. Nevertheless, it still has tons of cash left over each year and tons of cash on its balance sheet.

Slapping a 9.5 P/E on projected 2015 earnings of $2.48 gets us a price target of $23.50, or a 50% total return including dividends. This is just the kind of safe investment that’s perfect for retirement accounts. I also think it’s a perfectly reasonable addition to regular accounts in the stalwart category.

• I believe Cisco is a buy for regular accounts.
• I believe Cisco is a buy for retirement accounts.

Lawrence Meyers does not own shares of any companies mentioned.