Arista Networks Inc (NYSE:ANET) Stands Out as a Strong Growth Candidate

Growth investors looking for systematic ways to pick stocks often use established methods like those in Louis Navellier's "The Little Book That Makes You Rich." This plan uses eight basic rules meant to find companies showing better growth features through earnings momentum, financial condition, and operational quality. The screening method centers on specific measures including positive earnings revisions, steady earnings surprises, increasing sales and earnings growth, widening profit margins, good cash flow creation, and high returns on equity.

Arista Networks Inc (NYSE:ANET) appears as a noteworthy candidate when measured against Navellier's growth standards. The cloud networking solutions company shows several features that match the method's needs for finding companies with lasting growth potential.

Earnings Momentum and Revisions

The Little Book method highlights the value of analyst confidence and earnings steadiness, both areas where Arista does well:

• Positive Earnings Revisions: Analyst EPS estimates for the next quarter have been moved up by 14.43% over the last three months, showing increasing optimism about short-term results
• Consistent Earnings Surprises: The company has surpassed EPS estimates in all of the last four quarters, with an average surprise of 10.73%
• Earnings Acceleration: Current quarterly EPS growth of 39.05% is higher than the previous comparable quarter's growth of 32.91%, showing positive momentum

These numbers reflect Navellier's concentration on companies that regularly beat expectations and have increasing analyst confidence, which often comes before further price gains.

Revenue Growth and Profitability Expansion

Arista shows good top-line growth along with better operational efficiency:

• Sales Growth: Year-over-year revenue growth of 25.97% and quarterly growth of 30.43% are much higher than the method's minimum levels
• Expanding Margins: Operating margin has grown by 4.63 percentage points over the past year, showing the company is increasing sales while getting more efficient
• Strong Cash Flow: Free cash flow has increased by a notable 320.65% over the past year, giving financial room for continued investment

These elements match Navellier's need for companies that not only grow revenue but do so profitably, with widening margins indicating pricing strength and operational control.

Financial Health and Returns

The method favors companies that use shareholder capital effectively:

• High Return on Equity: At 29.83%, Arista's ROE is much higher than the 10% minimum requirement and is in the top group of its industry
• Exceptional Profitability: The company reaches operating margins of 43.14% and profit margins of 40.89%, some of the best in the communications equipment sector
• Strong Balance Sheet: With no outstanding debt and good liquidity, the company keeps financial flexibility without debt worries

These features reflect Navellier's focus on companies that create good returns on shareholder capital while keeping financial steadiness.

Fundamental Assessment Overview

According to ChartMill's detailed fundamental analysis, Arista Networks gets an overall rating of 7 out of 10. The company shows outstanding strength in profitability and financial condition, with growth measures that are much faster than industry peers. While the valuation seems high with a P/E ratio of 52.77, this extra cost may be reasonable given the company's better growth outlook and industry-leading margins. The analysis ends by stating that Arista represents a noteworthy chance for growth and quality investors even with its valuation issues.

Investment Considerations

For investors using the Little Book method, Arista Networks makes a solid case based on its match with several growth standards. The company's steady performance, speeding up fundamentals, and good competitive position in cloud networking create a noteworthy growth story. However, investors should think about the high valuation and watch if the company can keep its outstanding growth rates to support current price levels.

The present market situation, with the S&P 500 showing a positive short-term direction next to a neutral long-term view, may offer good conditions for growth stocks like Arista that show good fundamental features.

Exploring Additional Opportunities

Investors wanting to find other companies that meet the Little Book standards can view the full screening results to find possible investment candidates that share similar growth features.

Disclaimer: This article presents factual information and analysis for educational purposes only and does not constitute investment advice, recommendation, or endorsement of any security. Investors should conduct their own research and consult with financial advisors before making investment decisions. Past performance does not guarantee future results.