Analyzing Arista Networks (NYSE:ANET) & Applied Optoelectronics (NASDAQ:AAOI)

Applied Optoelectronics (NASDAQ:AAOI) and Arista Networks (NYSE:ANET) are both technology companies, but which is the better investment? We will contrast the two companies based on the strength of their profitability, institutional ownership, analyst recommendations, risk, valuation, earnings and dividends.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Applied Optoelectronics and Arista Networks, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Applied Optoelectronics	1	2	3	0	2.33
Arista Networks	0	1	20	2	3.04

Applied Optoelectronics presently has a consensus target price of $139.40, indicating a potential upside of 38.73%. Arista Networks has a consensus target price of $227.80, indicating a potential upside of 15.26%. Given Applied Optoelectronics’ higher probable upside, analysts clearly believe Applied Optoelectronics is more favorable than Arista Networks.

Profitability

This table compares Applied Optoelectronics and Arista Networks’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Applied Optoelectronics	-9.57%	-1.98%	-1.34%
Arista Networks	38.37%	30.65%	19.44%

Insider & Institutional Ownership

61.7% of Applied Optoelectronics shares are owned by institutional investors. Comparatively, 82.5% of Arista Networks shares are owned by institutional investors. 3.8% of Applied Optoelectronics shares are owned by insiders. Comparatively, 2.7% of Arista Networks shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Earnings & Valuation

This table compares Applied Optoelectronics and Arista Networks”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Applied Optoelectronics	$455.71 million	18.65	-$38.23 million	($0.78)	-128.83
Arista Networks	$9.01 billion	27.68	$3.51 billion	$3.17	62.35

Arista Networks has higher revenue and earnings than Applied Optoelectronics. Applied Optoelectronics is trading at a lower price-to-earnings ratio than Arista Networks, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Applied Optoelectronics has a beta of 3.79, suggesting that its stock price is 279% more volatile than the S&P 500. Comparatively, Arista Networks has a beta of 1.62, suggesting that its stock price is 62% more volatile than the S&P 500.

Summary

Arista Networks beats Applied Optoelectronics on 12 of the 15 factors compared between the two stocks.

About Applied Optoelectronics

Applied Optoelectronics, Inc. designs, manufactures, and sells fiber-optic networking products in the United States, Taiwan, and China. It offers optical modules, optical filters, lasers, laser components, subassemblies, transmitters and transceivers, turn-key equipment, headend, node, distribution equipment, and amplifiers. The company sells its products to internet data center operators, cable television, telecom equipment manufacturers, fiber-to-the-home, and internet service providers through its direct and indirect sales channels. Applied Optoelectronics, Inc. was incorporated in 1997 and is headquartered in Sugar Land, Texas.

About Arista Networks

Arista Networks, Inc. engages in the development, marketing, and sale of data-driven, client to cloud networking solutions for data center, campus, and routing environments in the Americas, Europe, the Middle East, Africa, and the Asia-Pacific. Its cloud networking solutions consist of Extensible Operating System (EOS), a publish-subscribe state-sharing networking operating system offered in combination with a set of network applications. The company offers data center and cloud networking systems, including newer artificial intelligence (AI) ethernet switching platforms; campus wired and wireless products, and routing systems addressing Core Routing, Edge Routing, Data Center Interconnect (DCI), Multi-cloud and Wide Area Networking (WAN) use cases; and a suite of value-add software solutions that leverage EOS to provide end-to-end orchestration, automation, analytics, network monitoring, and security. It also provides post contract customer support services, such as technical support, hardware repair and replacement parts beyond standard warranty, bug fixes, patches, and upgrade services. The company serves a range of industries comprising internet companies, service providers, financial services organizations, government agencies, media and entertainment companies, telecommunication service providers, and others. It markets and sells its products through distributors, system integrators, value-added resellers, and original equipment manufacturer partners, as well as through its direct sales force. The company was formerly known as Arastra, Inc. and changed its name to Arista Networks, Inc. in October 2008. Arista Networks, Inc. was incorporated in 2004 and is headquartered in Santa Clara, California.