Stock Analysis on Net

Arista Networks Inc. (NYSE:ANET)

Financial Reporting Quality: Aggregate Accruals

Microsoft Excel

Earnings can be decomposed into cash and accrual components. The accrual component (aggregate accruals) has been found to have less persistence than the cash component, and therefore (1) earnings with higher accrual component are less persistent than earnings with smaller accrual component, all else equal; and (2) the cash component of earnings should receive a higher weighting evaluating company performance.


Balance-Sheet-Based Accruals Ratio

Arista Networks Inc., balance sheet computation of aggregate accruals

US$ in thousands

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Operating Assets
Total assets 14,043,921 9,946,806 6,775,410 5,734,429 4,738,919
Less: Cash and cash equivalents 2,762,357 1,938,606 671,707 620,813 893,219
Less: Marketable securities 5,541,116 3,069,362 2,352,022 2,787,502 1,979,649
Operating assets 5,740,448 4,938,838 3,751,681 2,326,114 1,866,051
Operating Liabilities
Total liabilities 4,049,114 2,727,747 1,889,590 1,755,829 1,418,628
Operating liabilities 4,049,114 2,727,747 1,889,590 1,755,829 1,418,628
 
Net operating assets1 1,691,334 2,211,091 1,862,091 570,285 447,423
Balance-sheet-based aggregate accruals2 (519,757) 349,000 1,291,806 122,862
Financial Ratio
Balance-sheet-based accruals ratio3 -26.64% 17.14% 106.22% 24.14%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Apple Inc. -12.64% -9.04% -2.12% 36.09% -11.31%
Cisco Systems Inc. 75.07% -12.09% 5.96% 20.24% -7.26%
Dell Technologies Inc. -9.55% 12.16% -89.81% -10.71%
Super Micro Computer Inc. 105.88% 3.74% 58.35% 8.42% 20.97%
Balance-Sheet-Based Accruals Ratio, Sector
Technology Hardware & Equipment 11.96% -6.96% -13.35% 22.01%
Balance-Sheet-Based Accruals Ratio, Industry
Information Technology 21.52% 8.96% 18.15% 19.20%

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 2024 Calculation
Net operating assets = Operating assets – Operating liabilities
= 5,740,4484,049,114 = 1,691,334

2 2024 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2024 – Net operating assets2023
= 1,691,3342,211,091 = -519,757

3 2024 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × -519,757 ÷ [(1,691,334 + 2,211,091) ÷ 2] = -26.64%

4 Click competitor name to see calculations.

Financial ratio Description The company
Balance-sheet-based accruals ratio Ratio is found by dividing balance-sheet-based aggregate accruals by average net operating assets. Using the balance-sheet-based accruals ratio, Arista Networks Inc. deteriorated earnings quality from 2023 to 2024.

Cash-Flow-Statement-Based Accruals Ratio

Arista Networks Inc., cash flow statement computation of aggregate accruals

US$ in thousands

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Net income 2,852,054 2,087,321 1,352,446 840,854 634,557
Less: Net cash provided by operating activities 3,708,235 2,034,014 492,813 1,015,856 735,114
Less: Net cash (used in) provided by investing activities (2,457,354) (687,454) 216,327 (925,562) (608,802)
Cash-flow-statement-based aggregate accruals 1,601,173 740,761 643,306 750,560 508,245
Financial Ratio
Cash-flow-statement-based accruals ratio1 82.06% 36.37% 52.90% 147.50%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
Apple Inc. -25.90% -14.62% 0.00% 4.86% -20.46%
Cisco Systems Inc. 46.78% -7.65% -10.18% 1.64% -32.20%
Dell Technologies Inc. -15.65% 11.23% -20.97% -17.42%
Super Micro Computer Inc. 98.99% 0.89% 56.84% 5.08% 19.76%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Technology Hardware & Equipment -2.79% -10.03% -4.10% -0.72%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Information Technology 6.37% 1.46% 2.95% 8.70%

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 2024 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × 1,601,173 ÷ [(1,691,334 + 2,211,091) ÷ 2] = 82.06%

2 Click competitor name to see calculations.

Financial ratio Description The company
Cash-flow-statement-based accruals ratio Ratio is found by dividing cash-flow-statement-based aggregate accruals by average net operating assets. Using the cash-flow-statement-based accruals ratio, Arista Networks Inc. deteriorated earnings quality from 2023 to 2024.