It’s no secret that Cisco (NASDAQ: CSCO) stock has had a tough year – the stock has dropped nearly 42% since its 52-week high of $26 last July. Its earnings for the past two quarters have been disappointing and the company lost big by taking its eye of its core network switching business to pursue an ill-fated foray into the consumer equipment market.

Cisco also has had a tough PR ride in recent weeks: chief among them the loss of key executives to rival Juniper Networks (NYSE: JNPR) and lawsuits over the company’s alleged role in helping China oppress its citizens. Add to that growing competition from tech heavy-hitters like Hewlett-Packard (NYSE: HPQ) and Alcatel Lucent (NYSE: ALU), and there’s good reason many investors have dismissed Cisco as a tech stock far past its prime.

But that view might be shortsighted. While Cisco is no longer the dot-com darling of the early 2000s – and year-over-year revenue growth of competitors like Juniper and Alcatel Lucent is nearly three times Cisco’s growth rate — don’t dismiss CSCO stock just yet. Here are three reasons why the stock can still deliver a strong value proposition:

1. Solid Fundamentals. For starters, Cisco’s gross profit margin of 62.8% blows away that of the S&P 500 average (44.2%) – as well as that of Alcatel Lucent (34.8%) and HP (24.1%).  Add to that the fact that Cisco boasts annual revenue of nearly $43 billion and more than $43 billion in cash, compared to total debt of less than $17 billion. Lastly, the company has a P/E of only 11.7, compared to 22.67 for the rest of its industry and the S&P 500’s average of around 18.
2. Management Shakeup. Cisco CEO John Chambers admits he and his management team dropped the ball recently, losing focus on the company’s core switching and enterprise videoconferencing franchise and venturing into the ill-advised consumer equipment sector. Cisco’s Flip video camera and TV set-top boxes were duds. But Chambers has helped himself to a double portion of crow and started to get the company back on track. Cisco has streamlined its organizational structure, is cutting staff and plans to pare $1 billion off the company’s operating costs this year.
3. Strong Market Position. As federal, state and local customers felt increasing budget pressure, Cisco has had to battle falling sales in its public sector business. And private sector customers complain that the company’s switches are priced too high compared to rivals. Still, Cisco’s technology edge is strong and it’s market position dominant.  It is also very well positioned to benefit from the growth in videoconferencing, a market Gartner analysts say will hit $8.6 billion by 2015.

Bottom Line: Despite past challenges, Cisco is a solid company with leading-edge enterprise technology, a strong value proposition and a lot of cash. Sterne Agee analyst Shaw Wu on Monday said most of the bad news is likely priced into the stock; he rates Cisco stock a buy with a price target of $25. Management still has a lot of tough decisions to make over the next couple of quarters, but the company shows every sign of having the resolve to refocus itself for the networking and videoconferencing battle ahead.

If that weren’t enough, the company recently started paying dividends for the first time ever in March. The 1.5% yield for Cisco stock doesn’t burn down the house, but is certainly worth consideration.

As of this writing, Susan J. Aluise did not hold a position in any of the stocks named here.