ARISTA NETWORKS INC (NYSE:ANET): A CANSLIM Growth Leader with Strong Fundamentals

For investors looking for high-growth chances, the CANSLIM method created by William O'Neil gives a structured way to find market leaders with solid fundamental traits and technical momentum. This method mixes strict fundamental review with technical timing to find stocks showing outstanding earnings growth, institutional support, and relative strength. The system's acronym stands for seven main factors that help investors find companies with the possibility for major price gains.

Recent Performance and Growth Measures

ARISTA NETWORKS INC (NYSE:ANET) shows strong growth traits that match the CANSLIM method's focus on improving quarterly performance. The company's latest quarterly results display notable momentum in main financial measures:

• Quarterly EPS growth of 25% year-over-year
• Quarterly revenue growth of 27.5% year-over-year
• Three-year EPS compound annual growth rate of 46.9%

These numbers easily pass the CANSLIM limits of 20% for quarterly EPS growth and 25% for quarterly sales growth. The large three-year growth rate is much higher than the system's need for 25% minimum yearly earnings gains, showing steady fundamental betterment instead of single-quarter strength.

Profitability and Financial Condition

The company's profitability measures show very good operational efficiency and financial control. Arista Networks has a return on equity of 28.2%, much above the CANSLIM requirement of 10% ROE and putting it in the top group of its industry competitors. The company keeps a clean balance sheet with no debt, leading to a debt-to-equity ratio of 0.0, which gives financial room and lowers risk during market drops. Other important financial positives are:

• Profit margin of 39.7%, standing with the best in the communications equipment industry
• Operating margin of 42.9%, showing good cost control
• Current ratio of 3.25, pointing to strong short-term cash availability

Market Leadership and Institutional Support

Arista Networks displays solid market leadership traits with a relative strength rating of 81.6, meaning it does better than about 82% of all stocks in the market. This fits the CANSLIM need for stocks to show relative strength above 75, pointing to institutional notice and momentum. The institutional ownership is at 69.1%, under the 85% level suggested by the system, indicating space for more institutional buying instead of being too heavily held by big investors.

Technical Position and Market Situation

The technical view shows a varied short-term look in spite of good long-term fundamentals. Based on the technical analysis report, the stock keeps a positive long-term direction but deals with short-term challenges. Now trading in the lower part of its one-month range, the stock displays some consolidation action that might form a foundation for future progress. The wider market situation stays positive with the S&P 500 showing a good short-term direction, giving a helpful setting for CANSLIM choices.

Valuation Points

While Arista Networks does very well in growth and profitability measures, its valuation brings some points for investors. The stock trades at a P/E ratio of 46.9, above the S&P 500 average of 25.9, showing higher pricing for its growth path. However, the forward P/E of 38.9 fits better with market averages, and the company's very good growth rates and profitability might support some valuation premium. The fundamental analysis report gives the stock a good rating of 7 out of 10, pointing out great profitability and health scores together with strong growth measures.

Investment Summary

Arista Networks offers a strong case for CANSLIM-focused investors, matching or going beyond most of the system's strict factors. The company shows fast earnings growth, very good profitability, solid market leadership, and fair institutional support levels. While current valuation levels need thought and the technical view shows short-term consolidation, the fundamental growth story stays in place.

For investors wanting to look at more CANSLIM choices, the pre-configured CANSLIM screener gives continuous screening results using these same factors.

Disclaimer: This review is for information only and does not make up investment advice, suggestion, or backing of any security. Investors should do their own study and talk with financial advisors before making investment choices. Past results do not ensure future outcomes.