With EPS Growth And More, Arrow Electronics (NYSE:ARW) Makes An Interesting Case

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for Arrow Electronics

How Fast Is Arrow Electronics Growing Its Earnings Per Share?

In the last three years Arrow Electronics' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. Arrow Electronics' EPS skyrocketed from US$15.29 to US$24.78, in just one year; a result that's bound to bring a smile to shareholders. That's a fantastic gain of 62%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. EBIT margins for Arrow Electronics remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 7.7% to US$37b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Arrow Electronics' future EPS 100% free.

Are Arrow Electronics Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$6.5b company like Arrow Electronics. But we do take comfort from the fact that they are investors in the company. Indeed, they hold US$46m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. While their ownership only accounts for 0.7%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Should You Add Arrow Electronics To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Arrow Electronics' strong EPS growth. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Arrow Electronics' continuing strength. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. Still, you should learn about the 3 warning signs we've spotted with Arrow Electronics (including 2 which are a bit concerning).

Although Arrow Electronics certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.