Arista Networks Inc (ANET, Financial) has recently been in the spotlight, drawing interest from investors and financial analysts due to its robust financial stance. With shares currently priced at $297.89, Arista Networks Inc has witnessed a daily gain of 2.42%, marked against a three-month change of 29.16%. A thorough analysis, underlined by the GF Score, suggests that Arista Networks Inc is well-positioned for substantial growth in the near future.
What Is the GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 9/10
- Profitability rank: 10/10
- Growth rank: 10/10
- GF Value rank: 3/10
- Momentum rank: 6/10
Each one of these components is ranked and the ranks also have positive correlation with the long term performances of stocks. The GF score is calculated using the five key aspects of analysis. Through backtesting, we know that each of these key aspects has a different impact on the stock price performance. Thus, they are weighted differently when calculating the total score. With high ranks in financial strength, profitability, and growth, but a lower GF Value rank, GuruFocus assigned Arista Networks Inc the GF Score of 93 out of 100, which signals the highest outperformance potential.
Understanding Arista Networks Inc Business
Arista Networks Inc is a networking equipment provider that primarily sells Ethernet switches and software to data centers. Its marquee product is its extensible operating system, or EOS, that runs a single image across every single one of its devices. The firm operates as one reportable segment. It has steadily gained market share since its founding in 2004, with a focus on high-speed applications. Arista counts Microsoft and Meta Platforms as its largest customers and derives roughly three quarters of its sales from North America. With a market cap of $93.13 billion and sales of $5.86 billion, Arista Networks Inc boasts an impressive operating margin of 38.52%.
Financial Strength Breakdown
According to the Financial Strength rating, Arista Networks Inc's robust balance sheet exhibits resilience against financial volatility, reflecting prudent management of capital structure. With an Altman Z-Score of 23.51, Arista Networks Inc exhibits a strong defense against financial distress, highlighting its robust financial stability. With a favorable Debt-to-Revenue ratio of 0.01, Arista Networks Inc's strategic handling of debt solidifies its financial health.
Profitability Rank Breakdown
The Profitability Rank shows Arista Networks Inc's impressive standing among its peers in generating profit. Arista Networks Inc's Operating Margin has increased to 38.52% in 2023 from 33.43% in 2019, indicating a consistent improvement in profitability. The Piotroski F-Score confirms Arista Networks Inc's solid financial situation, and its strong Predictability Rank of 4.5 stars out of five underscores its consistent operational performance, providing investors with increased confidence.
Growth Rank Breakdown
Ranked highly in Growth, Arista Networks Inc demonstrates a strong commitment to expanding its business. The company's 3-Year Revenue Growth Rate is 36.3%, which outperforms better than 93.86% of companies in the Hardware industry. Moreover, Arista Networks Inc has seen a robust increase in its EBITDA over the past few years, with a three-year growth rate of 47 and a five-year rate of 42.1, highlighting the company's continued capability to drive growth.
Conclusion: Arista Networks Inc's Position for Outperformance
Considering Arista Networks Inc's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential outperformance. The company's strategic approach to financial management, consistent profitability, and aggressive growth trajectory make it a compelling choice for investors seeking long-term value. With a GF Score of 93, Arista Networks Inc stands out as a strong contender in the competitive technology sector, poised for continued success.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
