When Should You Buy Arrow Electronics, Inc. (NYSE:ARW)?

Arrow Electronics, Inc. (NYSE:ARW), is not the largest company out there, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$146 and falling to the lows of US$126. 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$126 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.

View our latest analysis for Arrow Electronics

What's The Opportunity In Arrow Electronics?

Great news for investors – Arrow Electronics is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Arrow Electronics’s ratio of 5.85x is below its peer average of 15.56x, which indicates the stock is trading at a lower price compared to the Electronic industry. Although, there may be another chance to buy again in the future. This is because Arrow Electronics’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Arrow Electronics, at least in the near future.

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. I 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 tabs on ARW for some time, but hesitant on making the leap, I 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.

If you want to dive deeper into Arrow Electronics, you'd also look into what risks it is currently facing. 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.