Back to top

Image: Bigstock

Should Value Investors Buy Arrow Electronics (ARW) Stock?

Read MoreHide Full Article

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

Arrow Electronics (ARW - Free Report) is a stock many investors are watching right now. ARW is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with a P/E ratio of 6.56, which compares to its industry's average of 7.26. Over the past year, ARW's Forward P/E has been as high as 4,441.88 and as low as 6.22, with a median of 8.63.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. ARW has a P/S ratio of 0.24. This compares to its industry's average P/S of 0.3.

Finally, we should also recognize that ARW has a P/CF ratio of 6.32. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. ARW's current P/CF looks attractive when compared to its industry's average P/CF of 7.42. ARW's P/CF has been as high as 10.39 and as low as 6, with a median of 7.88, all within the past year.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Arrow Electronics is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, ARW feels like a great value stock at the moment.


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Arrow Electronics, Inc. (ARW) - free report >>

Published in