Comparing Brocade Communications Systems (BRCD) & Arista Networks (ANET)

Brocade Communications Systems (NASDAQ: BRCD) and Arista Networks (NYSE:ANET) are both mid-cap computer and technology companies, but which is the superior business? We will contrast the two businesses based on the strength of their earnings, dividends, profitability, institutional ownership, risk, analyst recommendations and valuation.

Profitability

This table compares Brocade Communications Systems and Arista Networks’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Brocade Communications Systems 2.54% 8.49% 4.40%
Arista Networks 21.74% 22.64% 14.49%

Analyst Recommendations

This is a summary of recent ratings and target prices for Brocade Communications Systems and Arista Networks, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Brocade Communications Systems 1 13 0 0 1.93
Arista Networks 0 13 16 0 2.55

Brocade Communications Systems presently has a consensus target price of $11.11, suggesting a potential downside of 8.90%. Arista Networks has a consensus target price of $156.56, suggesting a potential downside of 8.48%. Given Arista Networks’ stronger consensus rating and higher probable upside, analysts plainly believe Arista Networks is more favorable than Brocade Communications Systems.

Dividends

Brocade Communications Systems pays an annual dividend of $0.22 per share and has a dividend yield of 1.8%. Arista Networks does not pay a dividend. Brocade Communications Systems pays out 157.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Insider & Institutional Ownership

81.0% of Brocade Communications Systems shares are owned by institutional investors. Comparatively, 60.8% of Arista Networks shares are owned by institutional investors. 1.8% of Brocade Communications Systems shares are owned by insiders. Comparatively, 28.1% of Arista Networks shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Valuation & Earnings

This table compares Brocade Communications Systems and Arista Networks’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Brocade Communications Systems $2.38 billion 2.10 $361.06 million $0.14 87.14
Arista Networks $1.36 billion 9.12 $350.69 million $3.85 44.43

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

Volatility and Risk

Brocade Communications Systems has a beta of 0.66, indicating that its stock price is 34% less volatile than the S&P 500. Comparatively, Arista Networks has a beta of 1.33, indicating that its stock price is 33% more volatile than the S&P 500.

Summary

Arista Networks beats Brocade Communications Systems on 12 of the 16 factors compared between the two stocks.

Brocade Communications Systems Company Profile

Brocade Communications Systems, Inc. (Brocade) is a supplier of networking hardware, software and services, including storage area networking (SAN) solutions and Internet protocol (IP) networking solutions for businesses and organizations of various types and sizes. The Company operates through three segments: SAN Products, IP Networking Products and Global Services. The SAN Products segment includes infrastructure products and solutions that help customers develop and deploy storage and server consolidation, disaster recovery and data security. The IP Networking Products segment includes Layer 2 and Layer 3 Ethernet switches, and routers to connect users over private and public networks. The Global Services segment includes break or fix maintenance, installation, consulting, network management and software maintenance, and post-contract customer support. Its products enable customers to deploy architectures and technologies, including virtualization and cloud computing.

Arista Networks Company Profile

Arista Networks, Inc. is a supplier of cloud networking solutions that use software innovations to address the needs of Internet companies, cloud service providers and data centers for enterprise support. It develops, markets and sells cloud networking solutions, which consist of its Gigabit Ethernet switches and related software. The Company’s cloud networking solutions consist of its Extensible Operating System (EOS), a set of network applications and its Ethernet switching and routing platforms. The programmability of EOS has allowed it to create a set of software applications that address the requirements of cloud networking, including workflow automation, network visibility and analytics, and has also allowed it to integrate with a range of third-party applications for virtualization, management, automation, orchestration and network services. EOS supports cloud and virtualization solutions, including VMware NSX, Microsoft System Center and other cloud management frameworks.

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