How would you like to own a stock that is trading right at book value with price/sales ratio of 0.18, and has rising earnings estimates and positive cash flow? I’m not sure about you but that sounds great to me. Meet Arrow Electronics.
Arrow Electronics (ARW) distributes a range of electronic components and enterprise computing products, services, and solutions to industrial and commercial users worldwide. The company operates in two segments, Global Components and Global Enterprise Computing Solutions.
Strong Second Quarter
Investors cheered the company’s strong second-quarter results. It earned $1.01 per share, a full 20 cents ahead of the analysts’ estimates. This is old hat for Arrow as it has exceeded estimates by an average of 16.7% over the past four quarters. The average analyst estimate has risen 65 cents to $3.85 for the year.
“This was another outstanding quarter for Arrow, as we achieved record second quarter revenues and earnings per share, with cash flow generation well ahead of our expectations. Our strategic focus on sales excellence, profitable market share growth, and the expansion of value-added services and capabilities all contributed to our success,” said Michael J. Long, chairman, president, and chief executive officer.
About a week ago, the company completed its acquisition of Shared Technologies. Management is expecting the acquisition to add up to 12 cents per share in earnings after the first year of operation. Shared deals with voice and data communications systems which is a higher margin business than most of Arrow’s lines. This should bode well for earnings and margins going forward.
Arrow is a screaming buy at such low valuations. It is currently trading at 6.7x current-year estimates. This is a big discount to both its peers and the S&P 500. The industry has thin margins and probably deserves to trade at a discount to the market as a whole, but this is too much in my opinion. If the stock traded at a multiple of 9x earnings, that would put the stock at $34.56. Let’s make that the target price. That would be a strong 35.4% return from current levels.
Mid Cap Poised to Rise is an article from: 
