While Arrow Electronics, Inc. (NYSE:ARW) might not have the largest market cap around , it saw significant share price movement during recent months on the NYSE, rising to highs of US$124 and falling to the lows of US$109. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Arrow Electronics' current trading price of US$116 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Arrow Electronics's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Arrow Electronics Still Cheap?
Great news for investors – Arrow Electronics is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we've used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock's cash flows. we find that Arrow Electronics's ratio of 6.92x is below its peer average of 19.85x, which indicates the stock is trading at a lower price compared to the Electronic industry. What's more interesting is that, Arrow Electronics's share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from Arrow Electronics?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let's also take a look at the company's future expectations. However, with a negative profit growth of -13% expected over the next couple of years, near-term growth certainly doesn't appear to be a driver for a buy decision for Arrow Electronics. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Although ARW is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to ARW, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you've been keeping an eye on ARW for a while, but hesitant on making the leap, we recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. In terms of investment risks, we've identified 2 warning signs with Arrow Electronics, and understanding them should be part of your investment process.
If you are no longer interested in Arrow Electronics, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.