Is Arista Networks Inc (NYSE:ANET) Undervalued?

Let's talk about the popular Arista Networks Inc (NYSE:ANET). The company's shares saw a significant share price rise of over 20% in the past couple of months on the NYSE. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s take a look at Arista Networks’s outlook and value based on the most recent financial data to see if the opportunity still exists. Check out our latest analysis for Arista Networks

Is Arista Networks still cheap?

Arista Networks appears to be overvalued according to my relative valuation model. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Arista Networks’s ratio of 46.44x is above its peer average of 27.97x, which suggests the stock is overvalued compared to the Communications industry. But, is there another opportunity to buy low in the future? Since Arista Networks’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Arista Networks look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. With profit expected to grow by 72.79% over the next couple of years, the future seems bright for Arista Networks. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? ANET’s optimistic future growth appears to have been factored into the current share price, 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 an eye on ANET for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more 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.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Arista Networks. You can find everything you need to know about Arista Networks in the latest infographic research report. If you are no longer interested in Arista Networks, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.