Applied Optoelectronics (NASDAQ:AAOI) vs. Arista Networks (NYSE:ANET) Head-To-Head Analysis

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

Analyst Ratings

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

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

Arista Networks presently has a consensus price target of $227.80, suggesting a potential upside of 14.03%. Applied Optoelectronics has a consensus price target of $139.40, suggesting a potential upside of 32.31%. Given Applied Optoelectronics’ higher possible upside, analysts clearly believe Applied Optoelectronics is more favorable than Arista Networks.

Institutional and Insider Ownership

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

Profitability

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

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

Volatility & Risk

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

Valuation and Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Arista Networks	$9.01 billion	27.98	$3.51 billion	$3.17	63.02
Applied Optoelectronics	$455.71 million	19.55	-$38.23 million	($0.78)	-135.08

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.

Summary

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

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.

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.