Arrow Electronics (ARW) Could Be 7% Undervalued Following Earnings Estimate Upgrades

Recent analyst coverage has pushed Arrow Electronics (ARW) into the spotlight, after current year earnings estimates were raised and the stock was flagged for both growth characteristics and a comparatively low P/E valuation.

At a share price of US$219.31, Arrow Electronics has had a strong run. The year-to-date share price return of 94.01% and a 1-year total shareholder return of 80.18% point to momentum that remains firm, even after a recent 7-day share price decline of 3.90% and a 90-day share price drop of 5.75%.

Scan beyond Arrow Electronics and compare its momentum and valuation profile with a curated 33 high quality undervalued stocks that share strong fundamentals with room for rerating.

Arrow Electronics has already delivered a powerful run, yet analyst targets and earnings revisions hint that some investors still see room for more. Has most of the upside already played out, or does the valuation argue otherwise?

Most Popular Narrative: 7% Undervalued

On the most followed narrative, Arrow Electronics screens at a fair value of $235 against a last close of $219.31. This frames the recent rally as still modestly short of that implied mark.

Accelerating adoption of cloud, infrastructure software, cybersecurity, and mid-market as-a-service offerings (notably through ArrowSphere) is increasing Arrow's exposure to higher-margin, recurring revenue streams, which is set to support both revenue growth and margin stability in future quarters.

See why 3 investors see Arrow Electronics as 7% undervalued.

Result: Fair Value of $235 (UNDERVALUED)

Still, the Arrow Electronics story can break if digital procurement sidelines traditional distributors, or if prolonged inventory corrections squeeze margins and strain working capital.

Find out about the key risks to this Arrow Electronics narrative.

Another View on Arrow Electronics Valuation

A different lens comes from Simply Wall St's DCF model, which values Arrow Electronics at $165.40 per share, below the current $219.31 price. That points to the stock trading above the model's estimate of future cash flows and raises the question of whether the recent momentum has already used up much of the cash flow upside.

For a closer look at how this cash flow view is built, use the full breakdown in the SWS DCF model to stress test your own assumptions against the current share price. Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Arrow Electronics for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 33 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

Sentiment on Arrow Electronics is split, which makes this a moment to move quickly, pressure test the numbers, and decide where you stand. To see what optimists are focusing on, review the 4 key rewards.

Looking for more ideas beyond Arrow Electronics?

If Arrow Electronics has caught your attention, do not stop here. Broaden your watchlist with fresh ideas that match your style and risk comfort.

• Target resilient progress by checking companies with strong balance sheets and fundamentals through the list of solid balance sheet and fundamentals (23 results).
• Hunt for quality at a discount with the 16 high quality undiscovered gems that may not yet be widely followed by the broader market.
• Focus on stability and income potential by scanning a curated 6 dividend fortresses that combine yield with robust underlying businesses.

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.

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