We've been asking ourselves recently if the market has placed a fair valuation on Arista Networks. Let's dive into some of the fundamental values of this Large-Cap Telecommunications company to determine if there might be an opportunity here for value-minded investors.
Arista Networks's Valuation Is in Line With Its Sector Averages:
Arista Networks Inc engages in the development, marketing, and sale of data-driven, client to cloud networking solutions for AI, data center, campus, and routing environments in the Americas, Europe, the Middle East, Africa, and the Asia-Pacific. Its cloud networking solutions consist of Extensible Operating System (EOS), a publish-subscribe state-sharing networking operating system offered in combination with a set of network applications. The company belongs to the Telecommunications sector, which has an average price to earnings (P/E) ratio of 18.22 and an average price to book (P/B) ratio of 1.86. In contrast, Arista Networks has a trailing 12 month P/E ratio of 61.8 and a P/B ratio of 18.18.
Arista Networks has moved 59.7% over the last year compared to 19.7% for the S&P 500 — a difference of 40.0%. Arista Networks has a 52 week high of $164.94 and a 52 week low of $59.43.
Wider Gross Margins Than the Industry Average of 39.55%:
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $2,411 | $2,318 | $2,948 | $4,381 | $5,860 | $7,003 |
| Gross Margins | 64% | 64% | 64% | 61% | 62% | 64% |
| Net Margins | 36% | 27% | 28% | 31% | 36% | 41% |
| Net Income (M) | $860 | $635 | $841 | $1,352 | $2,087 | $2,852 |
| Net Interest Expense (M) | $51 | $27 | $7 | $28 | $152 | $311 |
| Depreciation & Amort. (M) | $33 | $35 | $50 | $63 | $71 | $34 |
| Diluted Shares (M) | 1,294 | 1,271 | 1,277 | 1,266 | 1,269 | 1,281 |
| Earnings Per Share | $0.66 | $0.5 | $0.66 | $1.07 | $1.65 | $2.23 |
| EPS Growth | n/a | -24.24% | 32.0% | 62.12% | 54.21% | 35.15% |
| Avg. Price | $15.44 | $14.03 | $23.14 | $29.32 | $58.88 | $158.44 |
| P/E Ratio | 21.75 | 26.98 | 33.54 | 26.65 | 34.64 | 69.49 |
| Free Cash Flow (M) | $947 | $720 | $951 | $448 | $2,000 | $3,676 |
| CAPEX (M) | $16 | $15 | $65 | $45 | $34 | $32 |
| Current Ratio | 5.81 | 4.99 | 4.34 | 4.29 | 4.38 | 4.36 |
Arista Networks benefits from rapidly growing revenues and increasing reinvestment in the business, exceptional EPS growth, and generally positive cash flows. The company's financial statements show an excellent current ratio of 4.36 and wider gross margins than its peer group.
