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Last update on 2024-06-06

Arista Networks (ANET) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Arista Networks (ANET) achieves an impressive Piotroski F-Score of 8 out of 9 in 2023, reflecting strong financial health and operational efficiency.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 8

We're running Arista Networks (ANET) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
1
Operating Cashflow are higher than Netincome?
0
Leverage is declining?
1
Current Ratio is growing?
1
Number of shares not diluted?
1
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
1

Arista Networks (ANET) obtained a Piotroski F-Score of 8 out of 9 based on an analysis of its 2023 financial performance across several criteria: profitability, liquidity, and operating efficiency. Specifically, the company has demonstrated strong and consistent profitability over the years with a peak net income of $2,087,321,000 in 2023 and a significant increase in cash flow from operations to $2,034,014,000. Additionally, ROA and Gross Margin have improved, and the company has reduced its leverage to zero, indicating financial strength. The current ratio is also very strong, and the asset turnover ratio shows a slight improvement. However, Operating Cash Flow was slightly less than Net Income, and there's an unusual zero value reported in outstanding shares.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score, Arista Networks (ANET) appears to be a strong and financially stable company that could be a worthwhile investment. The high score of 8 out of 9 suggests a good potential for profitability and growth, bolstered by highly positive trends in net income, cash flow, and efficiency ratios. However, the unusual zero value in outstanding shares should be further investigated to rule out any potential red flags. Overall, ANET displays strong investment characteristics.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Arista Networks (ANET)

Company has a positive net income?

Net income is the total profit of a company after taxes and expenses. A positive net income is essential as it indicates profitability and sustainable business operations.

Historical Net Income of Arista Networks (ANET)

The net income for Arista Networks (ANET) in 2023 is $2,087,321,000, which is a positive figure. This indicates that the company is profitable. Analyzing the trend over the last 14 years, Arista Networks has consistently increased its net income from $34,035,000 in 2011 to $2,087,321,000 in 2023, demonstrating strong and consistent growth. This trend is indicative of effective management and a solid market position. Therefore, ANET scores 1 point for this criterion.

Company has a positive cash flow?

Cash Flow from Operations (CFO) assesses the cash a company generates from its regular business activities. Positive CFO indicates efficient operational cash generation.

Historical Operating Cash Flow of Arista Networks (ANET)

Arista Networks (ANET) recorded a CFO of $2,034,014,000 in 2023, a significant increase over prior years. This positive cash flow suggests robust operational efficiency. Historically, CFO has risen from $12,430,000 in 2011 to over $2 billion in 2023, highlighting consistent growth and operational solidification.

Return on Assets (ROA) are growing?

Change in ROA comes under the Piotroski F-Score and compares the current year's ROA to the previous year's ROA to gauge improvement.

Historical change in Return on Assets (ROA) of Arista Networks (ANET)

Arista Networks (ANET) has shown a commendable improvement in its Return on Assets (ROA) from 0.2162 in 2022 to 0.2496 in 2023. This increase signifies enhanced operational efficiency and asset utilization by the company, thereby scoring a point under this criterion. For context, reviewing the operating cash flow over the past 20 years exhibits a reflective growth, peaking significantly at $2,034,014,000 in 2023. Meanwhile, the industry's median ROA from 2010 to 2023 showed a decline from 0.4283 in 2021 to 0.3501 in 2023, highlighting Arista Networks' superior performance in comparison. Hence, this performance trend for ANET is essentially positive.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income is a critical measure of profitability as it indicates that a company is able to generate sufficient cash from its operations to cover its net income, implying a strong quality of earnings.

Historical accruals of Arista Networks (ANET)

For 2023, Arista Networks reported an Operating Cash Flow of $2,034,014,000 compared to a Net Income of $2,087,321,000. This results in a -1 criterion point for the Piotroski Score as the Operating Cash Flow is lower than the Net Income. Although both figures are substantially high, indicating robust profitability and operational success, the higher Net Income suggests some degree of accruals or adjustments. Therefore, this trend is unfavorable within the specific Piotroski criterion framework. However, the trajectory over the past years shows remarkable growth from $12,430,000 in operating cash flow in 2011 to the current level, demonstrating overall expansion and improvement in operational efficiency.

Liquidity of Arista Networks (ANET)

Leverage is declining?

This criteria evaluates the company's financial leverage. Lower leverage suggests reduced financial risk and a stronger balance sheet, indicating good financial health.

Historical leverage of Arista Networks (ANET)

For Arista Networks (ANET), the Leverage decreased from 0.0065 in 2022 to 0 in 2023. According to the Piotroski criteria, this indicates an improvement, as it suggests that the company has reduced its reliance on debt financing, thereby improving its financial risk and stability. Considering the past data, where leverage fluctuated yet remained relatively low across the years, this trend is particularly positive. Therefore, ANET scores 1 point for this criterion.

Current Ratio is growing?

The Current Ratio, a liquidity measure, compares a firm's current assets to its current liabilities. An increasing ratio often signifies better debt-paying capability.

Historical Current Ratio of Arista Networks (ANET)

In 2023, Arista Networks (ANET) boasts a Current Ratio of 4.3937, modestly higher than 4.2912 in 2022. This uptick signifies a stronger liquidity position, securing a 1-point increase. Historically, ANET’s ratios surpass the industry median, consistently showcasing superior liquidity. Charting these figures will depict ANET’s financial robustness, a key trait for investors.

Number of shares not diluted?

Change in Shares Outstanding assesses if a company is diluting shareholder value through issuing new shares. A decrease is favorable as it indicates lower potential for dilution.

Historical outstanding shares of Arista Networks (ANET)

The Outstanding Shares for Arista Networks (ANET) in 2023 shows a zero value, compared to 306,473,000 in 2022. Given the additional historical data, this appears to be an anomaly, as the typical trend for issuing shares does not end up at zero. Normal conditions would signal an increase in 2023, setting the Piotroski score point to 0. Such an unusual result suggests the need for further investigation.

Operating of Arista Networks (ANET)

Cross Margin is growing?

The Gross Margin criterion measures how efficiently a company is producing and selling goods. It is important as it indicates overall profitability and pricing strategy effectiveness.

Historical gross margin of Arista Networks (ANET)

Arista Networks' Gross Margin has indeed increased from 0.6107 in 2022 to 0.6195 in 2023, marking a positive shift. This suggests that the company has been able to generate higher profit from its sales compared to the previous year. This trend is favorable as it indicates better cost management or improved pricing power. Notably, Arista's Gross Margin outperforms the industry's median of 0.3501 for 2023 by a significant margin, reinforcing its competitive advantage. Over the past decade, aside from a dip in 2022, the company consistently performs above the industry median, highlighting its robust operational efficiency.

Asset Turnover Ratio is growing?

Asset turnover ratio measures a firm's efficiency in using its assets to generate sales. A higher ratio indicates better performance.

Historical asset turnover ratio of Arista Networks (ANET)

In 2022, Arista Networks (ANET) had an asset turnover ratio of 0.7005, which slightly increased to 0.7009 in 2023. Although this increase might appear marginal, it indicates a minor improvement in the company's ability to utilize its assets to generate revenue. When examining the historical data, significant declines from 2012 (1.7569) to 2020 (0.5194) are evident, thus the recent stabilization and incremental growth is a notable positive trend. Hence, a point is added for 2023.


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