Arrow Electronics Is Going Lower

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About: Arrow Electronics, Inc. (ARW)
by: Vanaheimr Capital
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Vanaheimr Capital
Value, long-term horizon, long/short equity, dividend investing
Vanaheimr capital
Summary

At first, the low price to book and low forward PE make the stop look inexpensive.

The consensus analyst estimates of $8.97 EPS is too high in our view; our model whows $5-$6 per share as much more realistic.

COGS (cost of goods sold) has risen slightly faster than revenue over the past three years; this shows ARW's lack of pricing power and lack of ability to increase margins.

Editor's note: This article has been updated from an earlier version to clarify statements about analyst estimates, one-time expenses, and debt issuance.

Investment Thesis

We believe that Arrow Electronics (ARW) valuation is high