Is There Now An Opportunity In Arrow Electronics, Inc. (NYSE:ARW)?

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$125 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$113 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.

See our latest analysis for Arrow Electronics

What Is Arrow Electronics Worth?

Good news, investors! Arrow Electronics is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 6.74x is currently well-below the industry average of 20.4x, meaning that it is trading at a cheaper price relative to its peers. However, given that Arrow Electronics’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Arrow Electronics look like?

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 adverse prospect of negative growth brings about some degree of risk. We recommend you think about 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.

So while earnings quality is important, it's equally important to consider the risks facing Arrow Electronics at this point in time. You'd be interested to know, that we found 2 warning signs for Arrow Electronics and you'll want to know about them.

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.