Here's What You May Have Missed About Arista Networks (ANET)

Now trading at a price of $148.4, Arista Networks has moved 3.87% so far today. In contrast, the S&P 500 index moved 0.16%. Read below for a basic value analysis of Arista Networks.

Arista Networks shares moved 29.49% over the last 52 weeks, with a high of $145.17 and a low of $89.11. During this time, the stock outperformed the S&P 500 index by 36.3%. As of January 2022, the company's 50-day average price is $127.0. Arista Networks (formerly Arastra) is an American computer networking company headquartered in Santa Clara, California. The company designs and sells multilayer network switches to deliver software-defined networking (SDN) solutions for large datacenter, cloud computing, high-performance computing, and high-frequency trading environments. The large-cap Technology company is based in Santa Clara, CA. Arista Networks has returned a 0.0% dividend yield over the last 12 months.

Snapshot of the Company's Higher Operating Margins Than the 21.41% Industry Average:

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $2,415 $2,322 $2,948 $4,381
Revenue Growth n/a -3.86% 26.97% 48.62%
Gross Margins 63.95% 63.82% 63.8% 61.07%
Gross Margins Growth n/a -0.2% -0.03% -4.28%
Operating Margins 33.37% 30.14% 31.37% 34.86%
Operating Margins Growth n/a -9.68% 4.08% 11.13%
Earnings Per Share $11.26 $8.33 $2.73 $4.41
EPS Growth n/a -26.02% -67.23% 61.54%
Diluted Shares (MM) 76 76 308 307
Free Cash Flow (MM) $947 $720 $951 $448
FCF Growth n/a -24.02% 32.15% -52.88%
Capital Expenditures (MM) $16 $15 $65 $45

Arista Networks Is Overpriced:

Compared to the Technology sector's average of 27.16, Arista Networks has a trailing twelve month P/E ratio of 50.99 and, according to its EPS guidance of 6.45, an expected P/E ratio of 23.01. Arista Networks's PEG ratio is 1.47 based on its 34.8% annual average growth rate of historical and projected earnings per share. However, we believe that it is more prudent to calculate the PEG ratio using the broader market's 5-year expected EPS growth rate of 13.05%, because the growth rate implied by Arista Networks's past and expected EPS is probably not sustainable. This more prudent approach shows a PEG ratio of 3.91, which suggests that the company's shares are actually overvalued.

Arista Networks's P/B ratio is 9.13 compared to its sector average of 6.23. The company is likely overvalued in terms of its net asset value. The company's shares are currently trading 214.66% above their fair value as expressed by Benjamin Graham's formula:

√(22.5 * 5-year average EPS * book value per share) = √(22.5 * 6.21 * 15.92) = $47.16

20 analysts are following Arista Networks and have set target prices ranging from $140.0 to $225.0 per share. On average, they have given the company a rating of buy. At the current price of $148.4, ANET is trading -11.47% away from its average analyst target price of $167.62 per share, implying an analyst consensus of some upside potential for the stock.

The company has no information on the number of shares sold short since 1% of the company's shares are tied to short positions. Institutions own 72% of Arista Networks's shares, while the insider ownership rate stands at 23%.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.