Dj Chmn Ullal Acquires 17759 Of Arista Networks Inc >Anet

Growth investors focus on stocks that are seeing above-average financial growth, as this feature helps these securities garner the market's attention and deliver solid returns. But finding a growth stock that can live up to its true potential can be a tough task.

By their very nature, these stocks carry above-average risk and volatility. Moreover, if a company's growth story is over or nearing its end, betting on it could lead to significant loss.

However, it's pretty easy to find cutting-edge growth stocks with the help of the Zacks Growth Style Score (part of the Zacks Style Scores system), which looks beyond the traditional growth attributes to analyze a company's real growth prospects.

Arista Networks (ANET) is one such stock that our proprietary system currently recommends. The company not only has a favorable Growth Score, but also carries a top Zacks Rank.

Research shows that stocks carrying the best growth features consistently beat the market. And for stocks that have a combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy), returns are even better.

Here are three of the most important factors that make the stock of this cloud networking company a great growth pick right now.

Earnings Growth

Earnings growth is arguably the most important factor, as stocks exhibiting exceptionally surging profit levels tend to attract the attention of most investors. And for growth investors, double-digit earnings growth is definitely preferable, and often an indication of strong prospects (and stock price gains) for the company under consideration.

While the historical EPS growth rate for Arista Networks is 38.1%, investors should actually focus on the projected growth. The company's EPS is expected to grow 24.8% this year, crushing the industry average, which calls for EPS growth of 14.7%.

Cash Flow Growth

While cash is the lifeblood of any business, higher-than-average cash flow growth is more important and beneficial for growth-oriented companies than for mature companies. That's because, growth in cash flow enables these companies to expand their businesses without depending on expensive outside funds.

Right now, year-over-year cash flow growth for Arista Networks is 47.4%, which is higher than many of its peers. In fact, the rate compares to the industry average of -18.7%.

While investors should actually consider the current cash flow growth, it's worth taking a look at the historical rate too for putting the current reading into proper perspective. The company's annualized cash flow growth rate has been 27.1% over the past 3-5 years versus the industry average of -1%.

Promising Earnings Estimate Revisions

Superiority of a stock in terms of the metrics outlined above can be further validated by looking at the trend in earnings estimate revisions. A positive trend is of course favorable here. Empirical research shows that there is a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

The current-year earnings estimates for Arista Networks have been revising upward. The Zacks Consensus Estimate for the current year has surged 4.9% over the past month.

Bottom Line

Arista Networks has not only earned a Growth Score of A based on a number of factors, including the ones discussed above, but it also carries a Zacks Rank #2 because of the positive earnings estimate revisions.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

This combination positions Arista Networks well for outperformance, so growth investors may want to bet on it.

Zacks Investment Research

Altice USA Inc. ATUS subsidiary Optimum has reached a milestone of 100% fiber connectivity across 500,000 residential customers. The unique feat was achieved on the back of significant investments to expand its fiber network footprint across its service areas. These include a $40 million investment in Long Island this year and a multi-million-dollar infrastructure upgrade in the Northeast markets over the last several years.

Altice has also forayed into new markets to strengthen its regional presence. The company has expanded in markets like Montclair and West Orange, NJ, to bring Optimum Fiber services to key communities, while solidifying its fiber network presence across the broader New York tri-state region.

The company remains on track with its five-year plan to build a fiber-to-the-home (FTTH) network and deploy its home communications hub. It believes that the FTTH network will be more resilient with reduced maintenance requirements and lower power usage. Altice is building a fiber network to deliver broadband speeds of up to 10 Gbps, which underscores its investment in technology.

ATUS Focusing on Inorganic Growth

Altice subsidiary Lightpath is also set to significantly boost its fiber network capabilities through the proposed acquisition of United Fiber and Data (“UFD”). UFD operates a 323-route mile high-fiber network stretching from New York City to Ashburn, VA, a critical link between the largest U.S. population center and the world's leading data center hub. Additionally, UFD’s 79-route mile metro network in New York City and New Jersey connects more than 350 enterprise and data center locations. This includes a high-fiber crossing of the Hudson River, enhancing Lightpath's existing infrastructure.

UFD’s vast geographical network complements Lightpath's current infrastructure, expanding its network to more than 20,000 route miles and enhancing its connectivity with over 140 data centers and seven cable landing stations. This will allow Lightpath to offer more regionally diverse, high-capacity services across the East Coast, particularly benefiting high-demand areas like Manhattan and the Ashburn data ecosystem.

With the acquisition, Lightpath will significantly increase its enterprise and data center coverage in Manhattan. Altice’s connectivity solutions stand to witness robust enhancement through Lightpath’s acquisition of UFD. The buyout not only expands Lightpath's fiber network footprint and technological capabilities but also reinforces its position in high-growth markets, promising substantial benefits for both companies and their customers.

ATUS Stock to Reap the Benefits?

Altice is focused on expanding its network for increased market penetration and fiber network upgrades for long-term sustainable growth. It plans to bring 100% fiber broadband to more than two-thirds of its footprint over the next few years to reach a total of 6.5 million FTTH passings by the end of 2025. Strategic acquisitions allow Altice to benefit from greater scale and operating efficiency while expanding its fiber footprint.

This expanded service capability is expected to attract more customers and increase market share. This, in turn, is likely to translate into incremental revenues and boost the stock.

Zacks Rank

Altice carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Players Operating in the Space

Arista Networks, Inc. ANET, carrying a Zacks Rank #2 (Buy) at present, is likely to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has a long-term earnings growth expectation of 16% and delivered an earnings surprise of 14.8%, on average, in the trailing four quarters.

It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed data center segment. Arista is increasingly gaining market traction in 200 and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.

NVIDIA Corporation NVDA, currently flaunting a Zacks Rank #1, is another key pick in the broader industry. It is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit or GPU. Over the years, the company’s focus has evolved from PC graphics to AI-based solutions that now support high-performance computing, gaming and virtual reality platforms.

The company’s GPU platforms are playing major roles in developing multi-billion-dollar end-markets like robotics and self-driving vehicles. NVIDIA has a long-term earnings growth expectation of 35.7% and delivered an earnings surprise of 9.8%, on average, in the trailing four quarters.

Workday Inc. WDAY, carrying a Zacks Rank #2, has a long-term earnings growth expectation of 21% and delivered an earnings surprise of 9.1%, on average, in the trailing four quarters. It is a leading provider of enterprise-level software solutions for financial management and human resource domains.

Workday’s cloud-based business model and expanding product portfolio have been the primary growth drivers. Moreover, the growing clout of Workday Prism Analytics and Adaptive Insights business planning cloud offerings holds promise.

Zacks Investment Research