Arista Networks (ANET) is one of the most trending stocks recently among Zacks.com visitors. Therefore, we recommend considering several factors that can affect a stock's short-term performance.
Over the past month, the cloud networking company's stock has increased by -2.3%. In comparison, the Zacks S&P 500 composite index changed -0.9%. During this period, the Zacks Communication-Components industry, which includes Arista Networks, fell 4.2%. The key question here is: What is the future direction of the stock price?
While media releases and rumors about significant changes in a company's business prospects typically cause its stock to “trend” and lead to immediate price movements, there are some fundamentals that ultimately govern buy-and-hold decisions. There are always facts.
Regarding revisions to performance forecasts
Zacks prioritizes evaluating changes in a company's future earnings expectations above all else. That's because we believe that the present value of future income streams determines the fair value of a stock.
Essentially, we study how the sell-side analysts covering a stock are revising their earnings estimates to reflect the impact of the latest business trends. And as a company's earnings expectations rise, so will the fair value of its stock. If the fair value is higher than the current market price, investors will be more willing to buy the stock, causing the price to rise. This is why empirical research shows a strong correlation between trends in earnings estimate revisions and short-term stock price movements.
For the current quarter, Arista Networks is expected to post earnings of $1.71 per share, representing a 19.6% increase from the year-ago period. The Zacks Consensus Estimate remained unchanged over the past 30 days.
The consensus earnings estimate for the current fiscal year of $7.41 represents a +6.8% year-over-year change. This estimate has not changed over the past 30 days.
Next year's consensus earnings estimate of $8.35 represents a +12.7% change from the revenue Arista Networks was expected to report a year ago. Estimates have remained unchanged over the past month.
The Zacks Rank, a proprietary stock evaluation tool with a strong, outside-audited track record, effectively harnesses the power of earnings estimate revisions to provide a more definitive picture of near-term stock price direction. Provides a complete picture. The magnitude of recent changes to consensus estimates and three other factors related to earnings estimates give Arista Networks a Zacks Rank #2 (Buy).
The chart below shows the evolution of the company's consensus EPS estimate for the next 12 months.
12 months EPS
Expected revenue growth rate
There's no question that a company's profit growth is the best indicator of its financial health, but nothing will happen if it isn't profitable. It's nearly impossible for a company to expand its bottom line without growing it over the long term. Therefore, it's important to know a company's earnings growth potential.
Arista Networks' current quarter consensus revenue estimate is $1.54 billion, representing a year-over-year change of +14.2%. For the current and next fiscal years, estimates of $6.54 billion and $7.42 billion represent changes of +11.6% and +13.5%, respectively.
Last reported results and surprising details
Arista Networks reported revenue of $1.54 billion in its last reported quarter. This corresponds to a +20.8% year-on-year change. EPS for the same period was $2.08, compared to $1.41 a year ago.
The reported earnings are a surprise of +0.66% when compared to the Zacks Consensus Estimate of $1.53 billion. EPS surprise was +21.64%.
The company beat consensus EPS estimates in each of the trailing four quarters. The company beat consensus revenue estimates every time during the period.
evaluation
You cannot make efficient investment decisions without considering stock valuation. To predict a stock's future price performance, it is important to determine whether the current price accurately reflects the intrinsic value of the underlying business and the company's growth prospects.
The present value of a company's valuation multiples, such as price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), and the past value of your company Comparing a company to its peers based on these parameters will help you see how reasonable its stock price is. You can get to know better.
The Zacks Value Style Score (part of the Zacks Style Scores system) pays close attention to both traditional and non-traditional valuation metrics and rates stocks from A to F, where A is better than B. , B is better than C, A is better than B, and B is better than C). ), can be very helpful in identifying whether a stock is overvalued, properly valued, or temporarily undervalued.
Arista Networks is rated F on this score, indicating that it trades at a premium relative to its industry peers. Click here to see the values of some of the metrics that determined this grade.
conclusion
The facts discussed here, and many others on Zacks.com, may help you decide whether the market buzz surrounding Arista Networks is worth paying attention to. However, the company's Zacks Rank #2 suggests it has the potential to outperform the broader market in the near term.
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