ARROW ELECTRONICS, INC. (ARW): what the price requires
At today's price, ARROW ELECTRONICS, INC. (ARW) is priced for +3.6% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-19 · Source: https://boothcheck.com/report/ARW
Headline
| Field | Value |
|---|---|
| Ticker | ARW |
| Company | ARROW ELECTRONICS, INC. |
| Current price | $202.39/sh |
| Composition | Global components 70% / Global ECS 30% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 1.7% |
| Operating margin today | 2.8% |
| Margin compression implied | -1.1pp |
| Implied growth | 3.6% |
| Multiple paid | 14x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 8.8% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~6pp.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.32σ |
| cohort percentile (of 225 peers) | 19 |
| implied end-window share | 0% |
Valuation X-Ray
The price is supported by asset-based and relative-multiple and growth-DCF value. A value/asset-supported name, not a pure growth bet.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.24x | 5 | expensive |
| Earnings | 1.34x | 5 | expensive |
| Relative | 0.41x | 5 | justifies |
| Growth | 0.61x | 3 | justifies |
Families that justify the price: Asset, Relative, Growth
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.2%); the inversion above states its own rate.
Per-Model Detail (n=18)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $326.04 | 0.62x | yes | FCF base $0.3B, growth 21% (input: historical growth), terminal g 4.0%, WACC 8.2%, 7yr projection |
| DCF Exit Multiple | Growth | $379.71 | 0.53x | yes | Exit EV/EBITDA: 8.9x / 10.9x / 12.9x (bear / base = today's held flat / bull), 7yr |
| Relative Valuation | Relative | $265.65 | 0.76x | yes | P/E 18x (static sector reference · 2026-04), scenarios: 14.6x / 18.0x / 21.4x (bear / base = reference held flat / bull), EV/EBITDA 12x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $151.93 | 1.33x | yes | BV/sh $130.38, ROE (TTM) 10.8%, ke 9.3% |
| Two-Stage Excess Return | Asset | $163.54 | 1.24x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $330.65 | 0.61x | yes | Rev $33.5B, growth 21% (input: historical growth; tapered), Terminal P/S: 0.3x / 0.3x / 0.4x (bear / base = today's held flat / bull, cap 12x) |
| Peter Lynch Fair Value | Relative | $488.95 | 0.41x | yes | EPS $13.97, growth 35% (input: historical EPS growth), PEG=0.41 (Undervalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $309.93 | 0.65x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $1.43B × (1−23%) / WACC 8.2% → EPV (no growth) |
| Residual Income | Asset | $165.75 | 1.22x | yes | BV $130.38 + 5yr PV of (ROE (TTM) 10.8% − Kₑ 9.3%) × BV; BV grows 7.0%/yr |
| Graham Number | Asset | $202.44 | 1.00x | yes | √(22.5 × EPS $13.97 × BVPS $130.38) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $227.82 | 0.89x | yes | EBITDA $1.16B × sector EV/EBITDA 12.0x |
| FCF Yield | Earnings | $21.36 | 9.48x | yes | FCF $303.7M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $13.32 | 15.19x | yes | SBC-adj FCF $0.27B (FCF $0.30B − SBC $0.04B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $450.77 | 0.45x | yes | EPS $13.97 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $49.40 | 4.10x | yes | BV $130.38 × (ROIC 3.1% / WACC 8.2%) |
| P/Sales Sector | Relative | $1620.31 | 0.12x | yes | Revenue $33.51B × sector P/S 2.5x |
| PEG Fair Value | Relative | $523.88 | 0.39x | yes | EPS $13.97 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $151.03 | 1.34x | yes | EPS $13.97 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $2.2b |
| Net debt / NOPAT (after-tax) | 3.19x |
| Net debt / operating income (pre-tax) | 2.45x |
| Share count CAGR (buyback) | -6.9% |
| Burning cash | no |
Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.
Bullet Takeaways
- Arrow Electronics distributes electronic components and enterprise computing products, a high-volume, low-margin business where operating profit is only about 3% of more than $33 billion in trailing revenue.
- The components cycle is turning up: Q1 2026 consolidated sales rose 39% to $9.5 billion and operating margins expanded as the destocking that depressed the prior year unwound.
- Capital is going back to owners: the share count has been shrinking about 7% a year, and the board authorized a new $1 billion buyback in May 2026.
Bull Case
The right way to read Arrow is as a deeply cyclical business at a turning point, because that frame changes what the thin margins mean. A 3% operating margin looks unimpressive until you know it is measured across a cycle that includes a recent components downturn, when customers worked down inventory rather than ordering. The numbers should be read off the trajectory, not the level. In Q1 2026 consolidated sales jumped 39% year over year to $9.5 billion, the Global Components segment grew $758 million sequentially to $6.6 billion, and the company's filing notes it "anticipates that demand for components will continue to gradually increase". A cyclical distributor coming off a trough, with both major segments reaccelerating, is exactly the setup where depressed trailing margins understate normalized earnings power.
The operating leverage in the model is what makes the upswing valuable. Because so much of a distributor's cost base is fixed, incremental revenue drops to profit at a higher rate on the way up. Non-GAAP operating margin expanded 160 basis points year over year in the quarter, and the components segment's margins rose 180 basis points sequentially. That is the mechanical benefit of volume returning to a network that was running below capacity. The recovery is broad, spanning geographies, verticals, and customer types rather than resting on one end market.
The capital allocation seals the bull case. Arrow has been retiring its own stock steadily, shrinking the share count about 7% a year, and in May 2026 the board authorized a fresh $1 billion repurchase program. Buying back shares of a cyclical business when earnings are depressed and the stock trades below where peers and most valuation methods land is high-return capital allocation: each repurchased share retires more earnings power than it would at a mid-cycle multiple. At roughly 16 to 17 times trailing earnings, below the sector median, a recovering distributor compounding fewer shares into a rising earnings base is the straightforward bull thesis.
Bear Case
The variable with the most leverage over Arrow's thesis is the one it cannot control: the macro demand cycle for electronics. This is a business whose revenue is a direct function of how much its customers are building, and that swings with industrial production, semiconductor demand, and the inventory psychology of thousands of manufacturers. The 39% revenue jump in the latest quarter is the upside of that cyclicality, but cyclicality cuts both ways. The recovery is being measured against a depressed prior-year base, and a distributor's earnings can reverse just as fast when customers shift back to working down inventory rather than ordering ahead.
Trade policy sits directly on top of that exposure. Arrow moves components across borders at enormous scale, with a large share of its business in Asia, so tariffs, export controls, and shifting trade rules feed straight into both its costs and its customers' willingness to build. The company itself flags that a higher mix of Asian business carries lower margins, which is why it guided to a seasonal margin headwind in the second quarter. A structural shift in trade policy that reroutes supply chains or raises the cost of moving electronics is a risk the current price, recovering off a trough, does not obviously reflect.
The deeper structural concern is what the low return on capital says about the business model. Arrow earns a return on invested capital of only about 3%, well below its cost of capital, which is the signature of a thin-spread intermediary that adds logistics and credit value but captures little of the economics of the products it moves. Distribution is a scale-and-efficiency game with limited pricing power; the value sits with the chipmakers upstream and the customers downstream. The price embeds operating-profit growth of roughly 9% a year for five years, which is achievable in a recovery but demanding to sustain through the next downturn. If the components upcycle stalls or trade frictions bite, the buyer is left holding a low-return, low-margin business at a multiple that assumed the good part of the cycle would persist.
Valuation
What the price is betting is modest and cycle-aware. At about $233 (June 27, 2026) a share, Arrow trades near 16 times company-wide operating income, which inverts to roughly 9% annual operating-profit growth sustained for about five years. Keep that approximate; it is one solve under fixed assumptions. The inversion notes that the rate is within what Arrow has recently delivered, so the stretch is in duration, not in whether a recovering distributor can grow at that pace for a year. For a business at a cyclical inflection, a mid-single-digit to high-single-digit growth assumption is a reasonable, not aggressive, bar.
The methods land mostly above the price, the pattern of a value-supported cyclical. The relative-multiple family, using a sector price-to-earnings near 18 times and an EV-to-EBITDA comparison, lands in the $227 to $265 range, above the current price. The earnings-power family, capitalizing normalized operating income, lands near $305. The asset-value family is lower, in the $150s, anchored on a high book value of about $130 a share and a mid-teens return on equity. Read together, the methods say the stock trades at or below where peer multiples and normalized earnings power place it, with the asset floor providing support. The one caution is the very low return on invested capital, which is why the asset-based methods sit below the price rather than above it.
Solvency is comfortable. Net debt sits near two times operating income, a manageable level for a business with the working-capital swings of distribution, where inventory and receivables expand in an upturn. The decisive question the valuation poses is one of cycle timing rather than balance-sheet risk: at 16 times trailing earnings that are recovering off a trough, the buyer is paying a below-sector multiple for a business whose normalized earnings are likely higher than the trailing figure, provided the components upcycle holds. The asset-based methods near $150 are the reminder of where value sits if the recovery proves short-lived.
Catalysts
The first quarter of 2026 confirmed the cyclical recovery. Consolidated sales rose 39% year over year to $9.5 billion, with Global Components at $6.6 billion, up $758 million sequentially, and Global ECS at $2.8 billion, up 39%. Non-GAAP operating margin reached 4.2%, expanding 160 basis points year over year, and non-GAAP diluted earnings per share were $5.22, up sharply from the prior-year quarter; these are company-defined measures, and the GAAP earnings base is the relevant one for trailing comparisons.
The forward catalysts are the continued components upturn and capital returns. Management guided second-quarter Global Components sales of $6.80 billion to $7.20 billion, implying 29% to 36% growth year over year, while flagging a seasonal margin headwind from a higher mix of lower-margin Asian business. The board also authorized a new $1 billion share repurchase program effective May 12, 2026. The metrics to watch over the next several quarters are whether components demand keeps rebuilding as the filing anticipates, whether margins hold against the Asian mix shift, and how aggressively the new buyback retires shares while the price sits below sector multiples.
Peer Cohorts (Per Segment, With Filing Citations)
Global Components (reported)
- AVT (AVNET, INC.)
- FY2025 10-K: …systems and other measures to mitigate the impact of tariffs, including selective supply chain, logistics, and pricing actions. The Company also has contingency plans to respond to a range of economic scenarios. The Company's management continues to monitor and evaluate the changing tariff situation, as well as the…
- FY2025 10-K: …appearing in Item 8 of this Annual Report on Form 10-K. Electronic Components Avnet's EC operating group primarily supports high and medium-volume customers. It markets, sells, and distributes electronic components from many of the world's leading electronic component manufacturers, including semiconductors, IP&E…
- WCC (WESCO International, Inc.)
- FY2025 10-K: …We may be unable to pass through incremental costs to customers in a timely manner or at all without adversely affecting our price competitiveness or margins. If we are unable to adjust pricing, sourcing or inventory strategies effectively, or if customers reduce or defer purchases (including due to demand…
- FY2025 10-K: …ways that we currently cannot predict. Certain geopolitical conflicts, and resulting international responses, have contributed to further volatility and uncertainty in the global financial and commodities markets, resulting in fluctuations in oil and commodity prices. There can be no assurance that economic and…
- SNX (TD SYNNEX CORPORATION)
- FY2025 10-K: …to undergo, consolidation. We have participated in this consolidation and expect to continue to assess opportunities. We also compete against companies who participate within the hyperscale computing infrastructure market including Jabil Inc., Celestica, Flex Ltd., Quanta Computer Inc. and Wiwynn Corporation. As we…
- FY2025 10-K: …are evaluated on an individual basis. 58 Table of Contents The Company has uncommitted accounts receivable purchase agreements with global financial institutions under which trade accounts receivable of certain customers and their affiliates may be acquired, without recourse, by the financial institutions. Available…
- INGM (Ingram Micro Holding Corp)
- FY2025 10-K: …sales operations, field sales and marketing personnel. As of December 27, 2025, we had approximately 9,800 associates in our sales and marketing organizations spanning all global regions. International Operations Approximately 66%, 66% and 64% of our consolidated net sales for Fiscal Year 2025, Fiscal Year 2024 and…
- FY2025 10-K: …any supply constraints can disrupt our global operations. Disruptions in local or international supply chains can cause significant delays, impacting inventory levels across our facilities. Supply chain constraints can also cause product prices and related fulfillment expenses to increase as well as prices we charge…
- DXPE (DXP Enterprises, Inc.)
- FY2025 10-K: …provides investors with additional understanding of the factors and trends affecting our business than could be obtained absent these disclosures. Refer to the Non-GAAP Financial Measures and Reconciliation section below for detailed reconciliations of our non-GAAP financial measures. Matters Affecting Comparability…
- FY2025 10-K: …Certain reclassifications were made to the prior year's consolidated financial statements to conform to the current year presentation. Such reclassifications did not have a material effect on our consolidated statements of operations and comprehensive income, balance sheets, cash flows or equity. Business…
Global ECS (reported)
- SNX (TD SYNNEX CORPORATION)
- FY2025 10-K: …that focus on the sale and promotion of products and services of selected suppliers or for specific end-market verticals. These specialists are also directly involved in establishing new relationships with leading OEM suppliers to create demand for their products and services and with resellers for their customers'…
- FY2025 10-K: …and networking solutions built specific to our customers' workloads and data center environments. We combine our core strengths in distribution with demand generation, supply chain management and design and integration solutions to help our customers achieve greater efficiencies in time to market, cost minimization,…
- INGM (Ingram Micro Holding Corp)
- FY2025 10-K: …sectors and our business. Increasing attention to environmental, social, and governance ("ESG") matters, including evolving and sometimes conflicting expectations and regulatory requirements, may subject us to unforeseen liability or cause harm to our reputation. Various stakeholders, including lenders, customers,…
- FY2025 10-K: …or are in the process of being registered, in the United States and various other countries. Even though our marks are not registered in every country where we conduct business, in many cases we have acquired rights in those marks because of our continued use of them. Human Capital Resources As of December 27, 2025,…
- CNXN (PC CONNECTION, INC.)
- FY2025 10-K: … Enterprise Solutions Segment. Through our custom-designed Web-based system, we are able to offer our larger corporate customers an efficient and effective method of sourcing, evaluating, purchasing, and tracking a wide variety of IT products and services. Our strategy is to be the primary single source procurement…
- FY2025 10-K: …providers. Although brand names and individual product offerings are important to our business, we believe that competitive products are available in substantially all of the merchandise categories offered by us. DISTRIBUTION We fulfill orders from customers both from products we hold in inventory and through…
- NSIT (INSIGHT ENTERPRISES, INC.)
- FY2025 10-K: …Committee, the purchase price of shares offered under the ESPP is an amount equal to 95 % of the fair market value of the common stock on the date of purchase. The ESPP is designed to comply with Section 423 of the Internal Revenue Code (the "IRC"), and thus is eligible for the favorable tax treatment afforded by…
- FY2025 10-K: …portfolio of solutions, far-reaching partnerships and 37 years of broad IT expertise. We amplify our solutions and services with global scale, local expertise and our e-commerce experience, enabling our clients to realize their digital ambitions in multiple ways. Our company is organized in the following three…
- PLUS (ePlus inc.)
- FY2025 10-K: …services, across the technology spectrum. We possess top-level engineering certifications with a broad range of leading IT technologies that enable us to offer multi-vendor IT solutions that are optimized for each of our customers' specific requirements. Underpinning the broader areas of cloud, security, AI,…
- FY2025 10-K: VA) for Collaboration Spaces. e Plus AVA TM uses robotic process automation accompanied by e Plus Managed Services to present an exceptional experience for users in video-enabled conference rooms and workspaces. ● Enhanced Maintenance Support (EMS) or e Plus Lifecycle-Services Support (ELSS) simplifies our customers…
- CDW (CDW CORP)
- FY2025 10-K: …programs, such as purchase or sales rebates and cooperative advertising reimbursements. We also purchase software from major software publishers and cloud providers for resale to our customers or for inclusion in the solutions we offer. Our agreements allow us to resell cloud based solutions, software or other…
- FY2025 10-K: …have five dedicated customer channels: corporate, small business, government, education, and healthcare, each of which generated $1.7 billion or greater in Net sales in 2025. Net sales to customers in the UK and Canada combined generated $2.7 billion in 2025. We believe this diversity of customer end-markets provides…
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
Q1 2026 earnings, May 7 2026 · Q1 2026 earnings, May 7 2026; FY2025 10-K