Arista Networks' (NYSE:ANET) 55% CAGR outpaced the company's earnings growth over the same five-year period

Buying shares in the best businesses can build meaningful wealth for you and your family. And we've seen some truly amazing gains over the years. Don't believe it? Then look at the Arista Networks Inc (NYSE:ANET) share price. It's 798% higher than it was five years ago. And this is just one example of the epic gains achieved by some long term investors. It's also good to see the share price up 21% over the last quarter. We love happy stories like this one. The company should be really proud of that performance!

The past week has proven to be lucrative for Arista Networks investors, so let's see if fundamentals drove the company's five-year performance.

View our latest analysis for Arista Networks

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, Arista Networks achieved compound earnings per share (EPS) growth of 27% per year. This EPS growth is slower than the share price growth of 55% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth. This optimism is visible in its fairly high P/E ratio of 54.30.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It is of course excellent to see how Arista Networks has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Arista Networks stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

We're pleased to report that Arista Networks shareholders have received a total shareholder return of 94% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 55% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. If you would like to research Arista Networks in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.