Here's Why We Think Arrow Electronics (NYSE:ARW) Might Deserve Your Attention Today

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Arrow Electronics (NYSE:ARW). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for Arrow Electronics

How Quickly Is Arrow Electronics Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Arrow Electronics' shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 59%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Arrow Electronics maintained stable EBIT margins over the last year, all while growing revenue 4.6% to US$37b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Arrow Electronics' future profits.

Are Arrow Electronics Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$7.9b company like Arrow Electronics. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. With a whopping US$54m worth of shares as a group, insiders have plenty riding on the company's success. This should keep them focused on creating long term value for shareholders.

Should You Add Arrow Electronics To Your Watchlist?

Arrow Electronics' earnings per share growth have been climbing higher at an appreciable rate. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So at the surface level, Arrow Electronics is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. We should say that we've discovered 3 warning signs for Arrow Electronics (2 shouldn't be ignored!) that you should be aware of before investing here.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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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.