Briefing From The Editor -- ANET Stock

Now trading at a price of $197.61, Arista Networks has moved 0.1% so far today.

Arista Networks returned gains of 68.0% last year, with its stock price reaching a high of $198.7 and a low of $98.2. Over the same period, the stock outperformed the S&P 500 index by 51.0%. More recently, the company's 50-day average price was $172.17. Arista Networks, Inc. develops, markets, and sells cloud networking solutions in the Americas, Europe, the Middle East, Africa, and the Asia-Pacific. Based in Santa Clara, CA, the large-cap Telecommunications company has 3,612 full time employees. Arista Networks has not offered a dividend during the last year.

An Exceptionally Strong Balance Sheet:

2018-02-20 2019-02-15 2020-02-14 2021-02-19 2022-02-15 2023-02-14
Revenue (MM) $1,646 $2,151 $2,411 $2,318 $2,948 $4,381
Gross Margins 64.0% 64.0% 64.0% 64.0% 64.0% 61.0%
Operating Margins 28% 32% 33% 30% 31% 35%
Net Margins 26.0% 15.0% 36.0% 27.0% 28.0% 31.0%
Net Income (MM) $423 $328 $860 $635 $841 $1,352
Earnings Per Share $1.34 $1.01 $2.66 $2.0 $2.63 $4.27
EPS Growth n/a -24.63% 163.37% -24.81% 31.5% 62.36%
Diluted Shares (MM) 316 323 324 318 320 316
Free Cash Flow (MM) $647 $527 $979 $750 $1,081 $537
Capital Expenditures (MM) -$15 -$24 -$16 -$15 -$65 -$45
Net Current Assets (MM) n/a n/a n/a n/a n/a n/a

Arista Networks has strong margins with a stable trend and exceptional EPS growth. Additionally, the company's financial statements display an excellent current ratio and wider gross margins than its peer group. Furthermore, Arista Networks has weak revenue growth and a flat capital expenditure trend and irregular cash flows.

Arista Networks's P/B and P/E Ratios Are Higher Than Average:

Arista Networks has a trailing twelve month P/E ratio of 30.2, compared to an average of 18.85 for the Telecommunications sector. Based on its EPS guidance of $6.8, the company has a forward P/E ratio of 25.3. The company doesn't provide forward earnings guidance, and the compound average growth rate of its last 6 years of reported EPS is 27.3%. On this basis, Arista Networks's PEG ratio is 1.11. Using instead the 10.7% weighted average of Arista Networks's earnings CAGR and the broader market's anticipated 5-year EPS growth rate, the company's PEG ratio is 2.83, which suggests that its shares may be overpriced. Furthermore, Arista Networks is likely overvalued compared to the book value of its equity, since its P/B ratio of 10.44 is higher than the sector average of 3.12. The company's shares are currently trading 413.1% above their Graham number.

There's an Analyst Consensus of Little Upside Potential for Arista Networks:

The 19 analysts following Arista Networks have set target prices ranging from $154.0 to $225.0 per share, for an average of $195.74 with a buy rating. As of April 2023, the company is trading -12.0% away from its average target price, indicating that there is an analyst consensus of little upside potential.

Arista Networks has a very low short interest because 1.2% of the company's shares are sold short. Institutions own 68.0% of the company's shares, and the insider ownership rate stands at 22.66%, suggesting a large amount of insider shareholders. The largest shareholder is Vanguard Group Inc, whose 9% stake in the company is worth $5,496,447,865.

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.