Should Value Investors Consider Purchasing Arrow Electronics (ARW) Shares?

Exploring Value Investing and Arrow Electronics

Although the Zacks Rank system focuses on analyzing earnings forecasts and their revisions to identify promising stocks, investors often develop their own unique approaches. With this in mind, we continually examine trends in value, growth, and momentum to uncover outstanding investment opportunities.

Among these strategies, value investing stands out as one of the most widely followed and consistently successful methods, regardless of market conditions. Value investors rely on fundamental analysis and classic valuation ratios to pinpoint stocks they believe are trading below their true worth.

Beyond the Zacks Rank, those seeking stocks with particular characteristics can turn to the Style Scores framework. For value-focused investors, the "Value" score is especially relevant. Stocks that earn an "A" for Value and hold a top Zacks Rank are considered some of the most attractive value plays available.

Arrow Electronics: A Value Stock to Watch

One company that may catch the eye of value investors is Arrow Electronics (ARW). Currently, ARW holds a Zacks Rank #1 (Strong Buy) and an "A" grade for Value. The stock is trading at a price-to-earnings (P/E) ratio of 9.44, compared to the industry average of 14.50. Over the past year, ARW's forward P/E has ranged from 8.04 to 11.05, with a median of 9.71.

Additionally, ARW's price/earnings-to-growth (PEG) ratio stands at 0.46, a metric that incorporates expected earnings growth. This compares favorably to the industry average PEG of 0.71. Over the last 52 weeks, ARW's PEG has fluctuated between 0.40 and 0.55, with a median value of 0.49.

Another important valuation measure is the price-to-book (P/B) ratio, which for ARW is 0.98. This compares the stock's market price to its book value (assets minus liabilities). ARW's P/B is lower than the industry average of 1.72. Over the past year, the company's P/B ratio has ranged from 0.78 to 1.22, with a median of 1.02.

Value investors also frequently consider the price-to-sales (P/S) ratio, calculated by dividing the stock price by company revenue. Since revenue figures are less susceptible to manipulation, this ratio is often seen as a reliable indicator. ARW's P/S ratio is 0.25, compared to the industry average of 0.43.

Finally, ARW's price-to-cash-flow (P/CF) ratio is 9.63, which evaluates the stock's price relative to its operating cash flow—a useful metric for identifying undervalued companies with strong cash generation. The industry average P/CF is 16.16. Over the past year, ARW's P/CF has ranged from 8.13 to 11.55, with a median of 10.03.

While value investors typically examine a variety of metrics, the data above suggests that Arrow Electronics is currently trading below its intrinsic value. Combined with its robust earnings outlook, ARW stands out as a compelling value stock in the market.

Zacks' Top Pick for Potential Growth

The Zacks research team has just identified five stocks with the highest potential to double in value in the coming months. Among these, Director of Research Sheraz Mian highlights one standout pick.

This leading choice is a lesser-known company specializing in satellite-based communications. With the space industry expected to reach a trillion-dollar valuation and the company's customer base expanding rapidly, analysts anticipate a significant surge in revenue by 2025. While not every top pick achieves extraordinary gains, this stock could outperform previous Zacks selections such as Hims & Hers Health, which soared by over 200%.

More Investment Insights