Today we're going to take a closer look at large-cap Telecommunications company Arista Networks, whose shares are currently trading at $183.56. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!
Arista Networks's P/B and P/E Ratios Are Higher Than Average:
Arista Networks, Inc. develops, markets, and sells cloud networking solutions in the Americas, Europe, the Middle East, Africa, and the Asia-Pacific. The company belongs to the Telecommunications sector, which has an average price to earnings (P/E) ratio of 18.85 and an average price to book (P/B) ratio of 3.12. In contrast, Arista Networks has a trailing 12 month P/E ratio of 32.7 and a P/B ratio of 9.69.
Arista Networks's PEG ratio is 2.99, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
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.
