Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Arista Networks, Inc.'s cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 26.9% to 30.0% annually, with expenses (COGS, SG&A, R&D) held at historical ratios. Depreciation is computed from a vintage matrix based on a 5-year useful life. Working capital is modeled using historical turnover days (DSO 68, DPO 64, DIO 267). At a 9.3% WACC with mid-year discounting, the terminal value (91% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 25.3x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $154.09 per share, suggesting ANET is undervalued by 24.2% at the current price of $124.08.
Adjust parameters to explore scenarios. Changes are for exploration only and do not affect saved valuations.
| 2026 | 2027 | 2028 | 2029 | 2030 | Terminal | |
|---|---|---|---|---|---|---|
| Profit Before Tax | 4,106 | 5,023 | 6,092 | 7,645 | 9,938 | 10,186 |
| (−) Net Interest | 229 | 280 | 339 | 426 | 553 | 567 |
| (+) D&A | 59 | 72 | 94 | 125 | 166 | 170 |
| EBITDA | 4,394 | 5,374 | 6,525 | 8,195 | 10,658 | 10,924 |
| (−) Tax | 558 | 683 | 829 | 1,040 | 1,352 | — |
| (−) CapEx | 128 | 156 | 189 | 238 | 309 | — |
| (−) ΔWC | 999 | 1,001 | 1,167 | 1,695 | 2,503 | — |
| Free Cash Flow (FCF) | 2,708 | 3,534 | 4,340 | 5,223 | 6,493 | — |
| Peers' EBITDA Multiple | 25.3x | |||||
| Terminal Value | 276,595 | |||||
| WACC / Discount Rate | 9.31% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 2,590 | 3,092 | 3,474 | 3,825 | 4,351 | 177,266 |
| Enterprise Value | 194,599 | |||||
| Projection Period | 17,333 | 8.9% | ||||
| Terminal Value | 177,266 | 91.1% | ||||
| (−) Current Net Debt | (1,964) | |||||
| Equity Value | 196,563 | |||||
| (÷) Outstanding Shares | 1276M | |||||
| Fair Price | $154 | +24.2% | ||||
| WACC \ EV/EBITDA Exit Multiple | 21.3x | 23.3x | 25.3x | 27.3x | 29.3x |
|---|---|---|---|---|---|
| 7.3% | $144 | $156 | $168 | $180 | $192 |
| 8.3% | $138 | $149 | $161 | $172 | $184 |
| 9.3% | $132 | $143 | $154 | $165 | $176 |
| 10.3% | $127 | $137 | $148 | $158 | $169 |
| 11.3% | $121 | $131 | $141 | $151 | $161 |
Current price: $124.08. Green = undervalued, Red = overvalued.
Based on default parameters
This is an unlevered Free Cash Flow to Firm (FCFF) model with a 5-year projection period. Revenue, expenses, D&A, and working capital are projected using the same line-by-line approach as the Growth Exit models. The key difference is the terminal value methodology: instead of assuming perpetual cash flow growth, the terminal value is calculated by applying the industry peer median EV/EBITDA multiple to the projected Year 6 EBITDA.
Using a peer exit multiple anchors the terminal value to how the market currently prices comparable companies, rather than relying on a theoretical perpetual growth assumption. This approach captures relative valuation dynamics and is particularly useful when a company is expected to converge toward industry-average profitability over time. The sensitivity matrix shows how fair value changes across different WACC and EV/EBITDA multiple scenarios.