Summary

Arrow Electronics has been hovering around $120.76 since December 2024, raising questions about its inclusion in a portfolio. Our analysts have evaluated the stock and shared their findings in a comprehensive research report.

Why Arrow Electronics Will Underperform

We are not enthusiastic about investing in Arrow Electronics at this time due to several concerns. Here are three key reasons why ARW doesn't impress us:

Long-Term Revenue Growth Flatter Than a Pancake

A company's long-term performance is an indicator of its overall quality. While a mediocre business can have a brief shining moment, a top-tier one consistently grows over years. Unfortunately, Arrow Electronics has struggled to increase demand, with $27.81 billion in trailing 12-month sales that are close to its revenue five years ago. This result is underwhelming and signifies poor business quality.

Key Statistics:

• Trailing 12-Month Sales: $27.81 billion
• Revenue Five Years Ago: $26.43 billion

Arrow Electronics' quarterly revenue has been a subject of interest for investors. While it's essential to monitor the company's revenue growth, there are more critical factors to consider when evaluating its overall performance.

EPS Took a Dip Over the Last Two Years

Long-term earnings trends provide valuable insights into a business's quality and potential for long-term success. However, it's also crucial to examine earnings per share (EPS) over shorter periods to identify emerging themes or developments that may impact the company's stock price. Unfortunately, Arrow Electronics' EPS has declined by more than its revenue over the last two years, dropping 32.1%. This decline indicates the company's struggles to adapt to shrinking demand.

Key Statistics:

• Trailing 12-Month EPS (Non-GAAP): $6.23
• EPS Decline Over Last Two Years: 32.1%

ROIC, or return on invested capital, is a metric that measures how much operating profit a company generates relative to the money it has raised through debt and equity investments. We favor businesses with high returns, but the trend in a company's ROIC often surprises the market and influences stock prices. Over the last few years, Arrow Electronics' ROIC has unfortunately decreased. While we appreciate management's past efforts, declining returns may be an indication of fewer profitable growth opportunities.

Key Statistics:

• Trailing 12-Month Return On Invested Capital: 11.2%
• ROIC Decrease Over Last Few Years: -23.5%

Final Judgment

We admire companies that improve their customers' lives, but in the case of Arrow Electronics, we'll be observing from a distance. Although the stock trades at a reasonable valuation of 10.3× forward P/E ($120.76 per share), we don't see significant opportunities at this time. Instead, consider investing in high-quality businesses that can thrive regardless of market conditions.

High-Quality Stocks for All Market Conditions

Market indices reached historic highs following Donald Trump's presidential victory in November 2024. However, the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth. While this has led many investors to adopt a cautious approach, we're focusing on our top ideas that can grow regardless of the political or macroeconomic climate.

Top 5 Growth Stocks

We've curated a list of high-quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025). This month's list includes familiar names like Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like Comfort Systems (+782% five-year return).

Conclusion

Investing in a company is not just about its current performance but also its potential for long-term growth. Arrow Electronics' struggles to increase demand, decline in EPS, and decrease in ROIC raise concerns about its overall quality. While the stock may seem reasonably valued at $120.76, we don't see significant opportunities at this time. Instead, consider investing in high-quality businesses that can thrive regardless of market conditions.

Conclusion

Arrow Electronics has been hovering around $120.76 since December 2024, raising questions about its inclusion in a portfolio. Our analysts have evaluated the stock and shared their findings in a comprehensive research report. We are not enthusiastic about investing in Arrow Electronics at this time due to several concerns, including long-term revenue growth that is flatter than a pancake, EPS that took a dip over the last two years, and ROIC that has declined over the last few years.

Our analysts have curated a list of high-quality stocks that can thrive regardless of market conditions. These businesses have generated a market-beating return of 183% over the last five years (as of March 31st 2025). Consider investing in these high-quality businesses to ensure long-term growth and success in your portfolio.