Arista Networks Inc. (NYSE:ANET) Presents a Compelling Mix of Strong Fundamentals and Technical Breakout Potential

Investors looking to find companies with both solid underlying business momentum and positive near-term price action often use a mixed fundamental and technical analysis method. One such tactic involves searching for high-growth stocks that are also showing encouraging technical breakout formations. This approach tries to find companies showing better financial health and speeding earnings, the signs of a classic growth stock, just as their share prices start to move out of a time of sideways movement, possibly marking the beginning of a new rising trend. This combination of solid fundamentals and positive technicals can present an interesting possibility for investors aiming for capital growth.

Arista Networks Inc. (NYSE:ANET) is a present example that came from this kind of search method. The cloud networking solutions company seems to match the main ideas of this tactic, offering a situation where outstanding company performance meets a stock chart that might be ready for its next phase.

Fundamental Strength: The Base of Growth

The fundamental argument for Arista Networks is very solid, which is the main screen in this investment tactic. A company cannot maintain a long-term price breakout without firm financials to back it. Arista’s fundamental analysis report shows excellent ratings that highlight its quality and growth path.

• Outstanding Growth Measures: Arista receives a high-level Growth Rating of 9 out of 10. The company has reported notable year-over-year growth, with Revenue rising by 27.75% and Earnings Per Share (EPS) growing by almost 30%. Importantly, this solid momentum is projected to persist, with analysts predicting average yearly EPS and revenue growth over 21% for the next years.
• Better Profitability and Health: The company adds to its growth with excellent profitability and a very strong balance sheet, each also getting a 9 out of 10.
  • Profitability: Arista has industry-best margins, including a Profit Margin of 39.73% and an Operating Margin of 42.88%, doing better than most of its communications equipment competitors. Its Return on Invested Capital (ROIC) of 23.49% shows very efficient use of capital.
  • Financial Health: Importantly, Arista works with no debt on its balance sheet, giving great financial flexibility and stability. Paired with good liquidity ratios, this leads to an Altman-Z score of 18.20, pointing to a minimal risk of financial trouble.

The one part where Arista seems less appealing is valuation, scoring a 3 out of 10. With a P/E ratio over 45, the stock is valued at a high level compared to the wider market. However, for a growth investing tactic, a higher valuation can sometimes be accepted by better and lasting growth rates, high profitability, and very good financial health, all things Arista clearly has.

Technical Setup: Readying for a Breakout

While fundamentals give the "why," technical analysis helps spot the "when." Arista’s current technical analysis report points to a stock that has been moving sideways after a large earlier rise, a typical setup before a new price move.

The stock’s total technical rating is poor (1 out of 10), mainly because of its weaker performance compared to the market over the last year. However, the more detailed Setup Rating is a much better 7 out of 10. This draws attention to the chance for a reversal or continuation formation. The analysis states that prices have been moving between about $120 and $141 over the last month, with price swings lessening, a usual signal of consolidation as buyers and sellers find a balance.

• Important Resistance Area: A clear resistance area is located just above the present price, ranging from about $128.77 to $131.12. This area is strengthened by a mix of key moving averages and trendlines.
• The Breakout Situation: For chart analysts, a clear move above this resistance area with high trading volume could indicate that the consolidation period is over and a new upward phase has started. This would be the technical "breakout" that the search tactic aims to find, possibly giving an entry point matched with returning positive momentum.

A Merging Possibility

The investment case for Arista Networks, from this mixed analysis, depends on the merging of two strong factors. Fundamentally, the company is a growth leader with top-level profitability and a very strong balance sheet. Technically, the stock is coming out of a time of pause and is challenging a key area of resistance. A successful breakout above this area could mean the market is starting to revalue the stock to better match its excellent fundamental outlook.

This example shows the usefulness of a search that joins strong growth fundamentals with encouraging technical formations. It tries to find companies where the business is performing very well at the same time the stock chart indicates investor opinion might be turning positive.

Interested in finding other stocks that match this description of strong growth and encouraging technical setups? You can look for more possible chances using the set Strong Growth Stock Technical Setups Screen.

Disclaimer: This article is for information only and is not financial advice, a suggestion, or an offer to buy or sell any security. Investing has risk, including the possible loss of principal. You should do your own research and talk with a qualified financial advisor before making any investment choices.