Is Arista Networks, Inc. (NYSE:ANET) Potentially Undervalued?

Today we're going to take a look at the well-established Arista Networks, Inc. (NYSE:ANET). The company's stock saw a significant share price rise of 29% in the past couple of months on the NYSE. The recent share price gains has brought the company back closer to its yearly peak. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today we will analyse the most recent data on Arista Networks’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Arista Networks

What's The Opportunity In Arista Networks?

According to our valuation model, the stock is currently overvalued by about 31%, trading at US$406 compared to our intrinsic value of $309.52. Not the best news for investors looking to buy! But, is there another opportunity to buy low in the future? Given that Arista Networks’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Arista Networks generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Arista Networks' earnings over the next few years are expected to increase by 61%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in ANET’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe ANET should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on ANET for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for ANET, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Diving deeper into the forecasts for Arista Networks mentioned earlier will help you understand how analysts view the stock going forward. Luckily, you can check out what analysts are forecasting by clicking here.

If you are no longer interested in Arista Networks, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.