Now trading at a price of $273.56, Arista Networks has moved 4.0% so far today.
Arista Networks returned gains of 99.3% last year, with its stock price reaching a high of $276.99 and a low of $129.01. Over the same period, the stock outperformed the S&P 500 index by 80.7%. More recently, the company's 50-day average price was $237.95. 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 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $2,151 | $2,411 | $2,318 | $2,948 | $4,381 | $5,595 |
| Revenue Growth | n/a | 12.05% | -3.87% | 27.21% | 48.62% | 27.71% |
| Gross Margins | 64% | 64% | 64% | 64% | 61% | 61% |
| Operating Margins | 13% | 33% | 30% | 31% | 35% | 37% |
| Net Margins | 15% | 36% | 27% | 28% | 31% | 34% |
| Net Income (MM) | $328 | $860 | $635 | $841 | $1,352 | $1,901 |
| Net Interest Expense (MM) | $3 | $51 | $27 | $7 | $28 | $112 |
| Depreciation & Amort. (MM) | $28 | $33 | $35 | $50 | $63 | $74 |
| Earnings Per Share | $1.01 | $2.66 | $2.0 | $2.63 | $4.27 | $5.98 |
| EPS Growth | n/a | 163.37% | -24.81% | 31.5% | 62.36% | 40.05% |
| Diluted Shares (MM) | 323 | 324 | 318 | 319 | 316 | 318 |
| Free Cash Flow (MM) | $479 | $947 | $720 | $951 | $448 | $1,548 |
| Current Ratio | 4.48 | 5.81 | 4.99 | 4.34 | 4.29 | 4.15 |
Arista Networks benefits from strong operating margins with a positive growth rate, exceptional EPS growth, and generally positive cash flows. The company's financial statements show an excellent current ratio and wider gross margins than its peer group.
Arista Networks Has Elevated P/B and P/E Ratios:
Arista Networks has a trailing twelve month P/E ratio of 39.5, compared to an average of 23.78 for the Telecommunications sector. Based on its EPS guidance of $7.29, the company has a forward P/E ratio of 32.6. According to the 32.6% compound average growth rate of Arista Networks's historical and projected earnings per share, the company's PEG ratio is 1.21. Taking the weighted average of the company's EPS CAGR and the broader market's 5-year projected EPS growth rate, we obtain a normalized growth rate of 10.9%. On this basis, the company's PEG ratio is 3.63. This suggests that these shares are overvalued. Furthermore, Arista Networks is likely overvalued compared to the book value of its equity, since its P/B ratio of 13.08 is higher than the sector average of 3.46. The company's shares are currently trading 421.1% above their Graham number. In conclusion, Arista Networks's impressive cash flow trend, decent P/B ratio, and reasonable use of leverage demonstrate that the company may still be fairly valued — despite its elevated earnings multiple.
Arista Networks Has an Average Rating of Buy:
The 18 analysts following Arista Networks have set target prices ranging from $180.0 to $320.0 per share, for an average of $245.5 with a buy rating. The company is trading 11.4% away from its average target price, indicating that there is an analyst belief that shares are overpriced.
Arista Networks has a very low short interest because 1.4% of the company's shares are sold short. Institutions own 70.3% of the company's shares, and the insider ownership rate stands at 18.62%, suggesting a large amount of insider shareholders. The largest shareholder is Vanguard Group Inc, whose 9% stake in the company is worth $7,632,005,508.
