Arista Networks Inc (NYSE:ANET) has emerged as a strong candidate for growth investors using the CAN SLIM system, a methodology pioneered by William O'Neil in his classic book "How to Make Money in Stocks." The system combines fundamental analysis with technical indicators to identify high-growth market leaders during bullish market conditions. Each letter in the acronym represents a specific criterion: Current quarterly earnings and sales acceleration, Annual earnings growth, New products or management, Supply and demand dynamics, Leader vs. laggard status, Institutional sponsorship, and Market direction. With the S&P500 currently showing positive trends in both the long and short term, the environment is favorable for applying this approach.
Meeting the CAN SLIM Criteria
C – Current Quarterly Earnings and Sales Growth
The CAN SLIM system demands that recent quarterly earnings per share (EPS) grow at least 20% year-over-year, with acceleration preferred. Arista Networks delivers an EPS growth of 33.85% in its most recent quarter compared to the same period last year, comfortably exceeding this threshold. Sales growth is equally strong at 35.13% year-over-year, well above the 25% minimum typically required. This acceleration in both metrics signals strong underlying business momentum, which is the foundational requirement for identifying potential market leaders.
A – Annual Earnings Growth
O'Neil advises screening for companies with at least 25% annual EPS growth over the past three years. Arista's 3-year EPS compound annual growth rate stands at 37.09%, significantly surpassing this benchmark. The company also shows a Return on Equity (ROE) of 27.59%, far exceeding the 10% minimum, indicating efficient use of shareholder capital to generate profits.
N – New Products and Market Leadership
While harder to quantify, Arista Networks operates at the forefront of cloud networking solutions, with its Extensible Operating System (EOS) and data center switching products addressing the growing demand for artificial intelligence and cloud infrastructure. The company's focus on AI networking and high-speed data center switches positions it as a provider of "new" technologies that drive adoption and revenue growth—exactly the type of innovation the CAN SLIM system seeks.
S – Supply and Demand
Debt levels are a key supply-side consideration. Arista Networks has a Debt-to-Equity ratio of 0.0, meaning it carries no outstanding debt. This is exceptional and places it among the best in its industry. Zero debt reduces financial risk and aligns with O'Neil's preference for companies with strong balance sheets. Additionally, average daily volume exceeds 9.8 million shares, ensuring ample liquidity.
L – Leader vs. Laggard
Relative strength measures how a stock performs versus the broader market. With a ChartMill Relative Strength score of 92.04, Arista outperforms 92% of all stocks, making it a clear market leader. The CAN SLIM system demands a minimum relative strength of 75, and Arista passes that threshold. The stock has also gained 96.72% over the past year, demonstrating sustained leadership.
I – Institutional Sponsorship
Institutional ownership sits at 73.36%, below the 85% upper limit that O'Neil suggests to avoid overcrowding. This level indicates meaningful institutional interest without being overly saturated, leaving room for further buying pressure as more funds discover the stock.
M – Market Direction
The current bull market environment, with positive short-term and long-term trends in the S&P500, supports deploying CAN SLIM strategies. O'Neil emphasizes that even the best stocks struggle in bear markets, so the favorable market backdrop enhances the probability of success.
Valuation Metrics
While Arista Networks scores exceptionally on growth and quality, its valuation requires context. The stock trades at a Price/Earnings ratio of 53.52, which is above the S&P500 average of 26.63 and the industry average of 51.72. However, the forward P/E of 37.69 suggests expectations for continued earnings expansion. With expected EPS growth of 22.54% annually, the PEG ratio indicates the stock is not cheap, but the strong profitability profile—including a 38.32% profit margin and 42.79% operating margin—may justify the premium for quality-focused growth investors.
Technical Assessment
From a technical perspective, Arista Networks scores a perfect 10 out of 10. Both the short-term and long-term trends are positive, with the stock trading in the upper portion of its 52-week range. The stock has rallied over 20% in the past month alone, though traders should note that a consolidation or pullback may precede the next leg higher. Key support levels exist near $159.69 (daily SMA) and $154.52, while resistance is concentrated around $177.53. The setup quality rating of 5 suggests a reasonable entry pattern, with reduced volatility in recent trading.
A detailed breakdown of the fundamental analysis and technical analysis are available for further review.
More Candidates from the CAN SLIM Screen
The criteria applied to identify Arista Networks are part of a broader screening approach. Investors looking for additional stocks that meet these stringent growth, quality, and momentum requirements can explore the full results by visiting the O'Neill CANSLIM High Growth screen. This dynamic screener can be adjusted to individual preferences, such as requiring float constraints or specific chart patterns.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always conduct your own research and consider your financial situation before making investment decisions.
Read full article here »
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Arista Networks Inc (NYSE:ANET) Hits All CAN SLIM Criteria for Growth Investors
Arista Networks Inc (NYSE:ANET) has emerged as a strong candidate for growth investors using the CAN SLIM system, a methodology pioneered by William O'Neil in his classic book "How to Make Money in Stocks." The system combines fundamental analysis with technical indicators to identify high-growth market leaders during bullish market conditions. Each letter in the acronym represents a specific criterion: Current quarterly earnings and sales acceleration, Annual earnings growth, New products or management, Supply and demand dynamics, Leader vs. laggard status, Institutional sponsorship, and Market direction. With the S&P500 currently showing positive trends in both the long and short term, the environment is favorable for applying this approach.
Meeting the CAN SLIM Criteria
C – Current Quarterly Earnings and Sales Growth
The CAN SLIM system demands that recent quarterly earnings per share (EPS) grow at least 20% year-over-year, with acceleration preferred. Arista Networks delivers an EPS growth of 33.85% in its most recent quarter compared to the same period last year, comfortably exceeding this threshold. Sales growth is equally strong at 35.13% year-over-year, well above the 25% minimum typically required. This acceleration in both metrics signals strong underlying business momentum, which is the foundational requirement for identifying potential market leaders.
A – Annual Earnings Growth
O'Neil advises screening for companies with at least 25% annual EPS growth over the past three years. Arista's 3-year EPS compound annual growth rate stands at 37.09%, significantly surpassing this benchmark. The company also shows a Return on Equity (ROE) of 27.59%, far exceeding the 10% minimum, indicating efficient use of shareholder capital to generate profits.
N – New Products and Market Leadership
While harder to quantify, Arista Networks operates at the forefront of cloud networking solutions, with its Extensible Operating System (EOS) and data center switching products addressing the growing demand for artificial intelligence and cloud infrastructure. The company's focus on AI networking and high-speed data center switches positions it as a provider of "new" technologies that drive adoption and revenue growth—exactly the type of innovation the CAN SLIM system seeks.
S – Supply and Demand
Debt levels are a key supply-side consideration. Arista Networks has a Debt-to-Equity ratio of 0.0, meaning it carries no outstanding debt. This is exceptional and places it among the best in its industry. Zero debt reduces financial risk and aligns with O'Neil's preference for companies with strong balance sheets. Additionally, average daily volume exceeds 9.8 million shares, ensuring ample liquidity.
L – Leader vs. Laggard
Relative strength measures how a stock performs versus the broader market. With a ChartMill Relative Strength score of 92.04, Arista outperforms 92% of all stocks, making it a clear market leader. The CAN SLIM system demands a minimum relative strength of 75, and Arista passes that threshold. The stock has also gained 96.72% over the past year, demonstrating sustained leadership.
I – Institutional Sponsorship
Institutional ownership sits at 73.36%, below the 85% upper limit that O'Neil suggests to avoid overcrowding. This level indicates meaningful institutional interest without being overly saturated, leaving room for further buying pressure as more funds discover the stock.
M – Market Direction
The current bull market environment, with positive short-term and long-term trends in the S&P500, supports deploying CAN SLIM strategies. O'Neil emphasizes that even the best stocks struggle in bear markets, so the favorable market backdrop enhances the probability of success.
Valuation Metrics
While Arista Networks scores exceptionally on growth and quality, its valuation requires context. The stock trades at a Price/Earnings ratio of 53.52, which is above the S&P500 average of 26.63 and the industry average of 51.72. However, the forward P/E of 37.69 suggests expectations for continued earnings expansion. With expected EPS growth of 22.54% annually, the PEG ratio indicates the stock is not cheap, but the strong profitability profile—including a 38.32% profit margin and 42.79% operating margin—may justify the premium for quality-focused growth investors.
Technical Assessment
From a technical perspective, Arista Networks scores a perfect 10 out of 10. Both the short-term and long-term trends are positive, with the stock trading in the upper portion of its 52-week range. The stock has rallied over 20% in the past month alone, though traders should note that a consolidation or pullback may precede the next leg higher. Key support levels exist near $159.69 (daily SMA) and $154.52, while resistance is concentrated around $177.53. The setup quality rating of 5 suggests a reasonable entry pattern, with reduced volatility in recent trading.
A detailed breakdown of the fundamental analysis and technical analysis are available for further review.
More Candidates from the CAN SLIM Screen
The criteria applied to identify Arista Networks are part of a broader screening approach. Investors looking for additional stocks that meet these stringent growth, quality, and momentum requirements can explore the full results by visiting the O'Neill CANSLIM High Growth screen. This dynamic screener can be adjusted to individual preferences, such as requiring float constraints or specific chart patterns.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always conduct your own research and consider your financial situation before making investment decisions.
Read full article here »