Arista Networks Inc (NYSE:ANET) Fits the CAN SLIM Strategy with Strong Growth and Market Leadership

The CAN SLIM investment strategy, created by William O’Neil, is a method focused on growth that blends fundamental and technical analysis to spot stocks with high potential. This approach highlights strong earnings growth, support from institutions, and leadership in the market, while also needing positive technical patterns and overall market trends. By looking for firms with rising revenue and earnings, solid profitability measures, and strong performance compared to peers, the strategy targets stocks likely to see notable gains.

Arista Networks Inc (NYSE:ANET) stands out as a strong option for CAN SLIM investors due to its fit with the strategy’s main principles. Here, we explain why ANET meets the criteria:

Key CAN SLIM Criteria and ANET’s Fit

C = Current Quarterly Earnings and Sales Growth

• EPS Growth (Q2Q): ANET posted a 30.65% year-over-year rise in earnings per share, above the CAN SLIM minimum of 20%.
• Revenue Growth (Q2Q): Sales increased 27.58%, topping the 25% mark.
• Why It Matters: Rising quarterly growth points to strong business performance, a key feature of CAN SLIM stocks.

A = Annual Earnings Growth

• 3-Year EPS CAGR: ANET’s earnings grew at a 46.94% yearly rate over three years, far exceeding the 25% goal.
• Return on Equity (ROE): At 29.93%, ANET shows better profitability than 94% of its competitors in the Communications Equipment sector.
• Why It Matters: Consistent high ROE and earnings growth indicate a business model that can scale, a trait of market leaders.

N = New Products, Highs, and Chart Bases

• ANET focuses on cloud networking solutions, a fast-growing area fueled by AI and data center needs.
• The stock is near the top of its 52-week range but has not yet reached new highs.
• Why It Matters: CAN SLIM prefers firms with innovative offerings in growing markets, where technical breakouts signal institutional interest.

S = Supply and Demand

• Debt/Equity Ratio: ANET has no debt, an uncommon feature that lowers financial risk.
• Liquidity: Average daily volume of 9.1 million shares means there is plenty of trading activity.
• Why It Matters: No debt and high liquidity minimize downside risk and make it easier for large institutions to invest.

L = Market Leadership

• Relative Strength (CRS): ANET beats 91% of all stocks, a key CAN SLIM requirement.
• Why It Matters: High relative strength shows institutions are buying and the market has confidence in the stock.

I = Institutional Sponsorship

• Institutional Ownership: At 69.6%, ANET has a good level of institutional interest with room for more buying.
• Why It Matters: Moderate institutional ownership means there could be more demand if growth continues.

M = Market Direction

• The S&P 500’s upward trends in both the short and long term match CAN SLIM’s focus on bull markets.

Technical and Fundamental Overview

• Technical Rating (10/10): ANET’s chart displays a clear upward trend across all timeframes, with support at $96.20,$96.87 and $86.37. However, recent price swings suggest waiting for a period of stability before buying (Full Technical Analysis).
• Fundamental Rating (7/10): ANET performs well in profitability (ROE: 29.93%) and growth (3Y EPS CAGR: 46.94%) but trades at a high valuation (P/E: 47.22). Its lack of debt and strong margins help justify the premium (Full Fundamental Analysis).

Conclusion

Arista Networks embodies the CAN SLIM approach: strong earnings growth, leadership in its sector, and solid institutional support. While the stock is priced high, its fundamentals and technical trends suggest it could keep performing well in a rising market.

For more stocks that fit the CAN SLIM criteria, check out our pre-configured screener here.

Disclaimer: This analysis is not investment advice. Do your own research or consult a financial advisor before making decisions.