AVNET, INC. (AVT): what the price requires

At today's price, AVNET, INC. (AVT) is priced for +9.6% 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/AVT

Headline

FieldValue
TickerAVT
CompanyAVNET, INC.
Current price$85.57/sh

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin needed1.9%
Operating margin today2.6%
Margin compression implied-0.7pp
Implied growth9.6%
Multiple paid16x 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 9.4% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~6.2pp.

How unusual the bet is: within-range (limited comparison data)

ReferenceValue
vs own history+0.43σ
implied end-window share0%

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

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.

FamilyMedian price/FVModelsReads
Asset4.70x5expensive
Earnings2.05x2expensive
Relative1.40x3expensive
Growth0.80x3justifies

Families that justify the price: Growth Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 6.8%); the inversion above states its own rate.

Per-Model Detail (n=13)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$14.395.95xyesFCF base $0.1B, growth 13% (input: historical growth), terminal g 4.0%, WACC 6.8%, 6yr projection
DCF Exit MultipleGrowth$132.750.64xyesExit EV/EBITDA: 13.7x / 15.7x / 17.7x (bear / base = today's held flat / bull), 6yr
Relative ValuationRelative$61.191.40xyesP/E 22.55x (blended: static sector reference 18x + trailing (TTM) 33x), scenarios: 18.6x / 22.6x / 26.5x (bear / base = reference held flat / bull), EV/EBITDA 12x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$27.883.07xyesBV/sh $59.73, ROE (TTM) 4.3%, ke 9.3%
Two-Stage Excess ReturnAsset$18.194.70xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$106.640.80xyesRev $25.0B, growth 13% (input: historical growth; tapered), Terminal P/S: 0.2x / 0.3x / 0.3x (bear / base = today's held flat / bull, cap 12x)
Growth-Adjusted P/ERelative——no—
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$81.501.05xyesNormalized EBIT (5y avg op income, one-time charges added back) $0.82B × (1−33%) / WACC 6.8% → EPV (no growth)
Residual IncomeAsset$15.545.51xyesBV $59.73 + 5yr PV of (ROE (TTM) 4.3% − Kₑ 9.3%) × BV; BV grows 2.8%/yr
Graham NumberAsset$59.001.45xyes√(22.5 × EPS $2.59 × BVPS $59.73) — Graham's conservative floor
EV/EBITDA RelativeRelative$56.761.51xyesEBITDA $0.64B × sector EV/EBITDA 12.0x
FCF YieldEarnings$0.018557.00xyesFCF $32.9M / Kₑ 9.3% — zero-growth perpetuity (excluded from median)
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings$2.1739.43xyesEPS $2.59 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median)
ROIC-Justified P/BAsset$15.285.60xyesBV $59.73 × (ROIC 1.7% / WACC 6.8%)
P/Sales SectorRelative$752.290.11xyesRevenue $24.96B × sector P/S 2.5x
PEG Fair ValueRelative——no—
Earnings YieldEarnings$28.003.06xyesEPS $2.59 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$2.7b
Net debt / NOPAT (after-tax)6.41x
Net debt / operating income (pre-tax)4.30x
Interest coverage2.6x
Share count CAGR (buyback)-4.5%
Burning cashno

Bullet Takeaways

At $91.48 the price pays about 16x company-wide operating income, implying roughly 12% operating growth a year for five years. For a thin-margin electronics distributor, only the growth DCF reaches the price; asset, earnings-power, and peer-multiple frames all say richly valued.

The surprise in the data is the recovery. Q2 fiscal 2026 sales of about $6.3 billion grew 12% year over year and beat the high end of guidance, with adjusted EPS of $1.05, and the company guided Q3 to $6.2 to $6.5 billion and $1.20 to $1.30. The cyclical trough appears to be behind it.

The structural tension is margin. Operating margin runs near 2 to 3%, and Electronic Components operating income has fallen from $1,179.6 million to $708.2 million across recent years even as revenue held. The bet is durable compounding the static frames cannot price, on a business whose returns on capital sit below its cost of capital.

Bull Case

The counterintuitive finding sits in the growth line of a business most investors file under low-growth distribution: Avnet just grew sales 12% year over year. Q2 fiscal 2026 revenue of roughly $6.3 billion came in above the high end of guidance, with growth across every region, Asia up 17%, Europe up 8%, and the Americas up 5%. Adjusted EPS of $1.05 also beat the high end. For a component distributor coming out of a destocking cycle, that is a sharp inflection, and management guided Q3 to $6.2 to $6.5 billion with EPS of $1.20 to $1.30, pointing to continued sequential momentum.

The model behind it is scale and working-capital discipline. Avnet sits between thousands of suppliers and customers, and its value is logistics and inventory at volume rather than product margin. Operating income was $187 million in Electronic Components and $20 million in Farnell in the quarter, with Farnell sales up 24% year over year, the higher-margin catalog business recovering faster than the core. The reverse-DCF implies about 12% operating growth for five years, and the inversion notes that near-term pace is within what Avnet has recently delivered, so the rate is not the stretch.

The price is built on a durability premium the static valuation frames structurally cannot capture. A distributor's book value and trailing earnings understate a franchise whose worth is its supplier relationships, its global footprint, and its ability to take share as the cycle turns. The FY2025 10-K acknowledges the inventory risk directly, that components sold into cyclical markets may decline in value or become obsolete, which is exactly the working-capital muscle that separates a disciplined distributor from a weak one. If Avnet converts the upcycle into share gains while holding inventory discipline, the compounding the growth DCF prices is achievable in a way the asset floors will always miss.

Bear Case

The structural truth a holder would rather not face is that this is a 2%-margin business priced for durable compounding, and only one valuation frame in the whole set reaches the price. At $91.48 (June 27, 2026) the asset, earnings-power, and peer-multiple methods all say richly valued. The simple and two-stage excess-return marks land near $18 to $28, residual income near $16, and ROIC-justified book value near $15, because returns on invested capital sit around 1.7% against a 6.9% WACC. Only the growth DCF clears the quote, and it does so by assuming the upcycle compounds for years.

The margin history is the warning the recovery narrative glosses over. The FY2025 10-K shows Electronic Components operating income falling from $1,179.6 million to $947.5 million to $708.2 million across recent fiscal years even as the top line held, with selling, general and administrative expense staying near $1.3 billion. Distribution margins compress when supply normalizes and pricing power shifts back to customers, and the current quarter's 12% sales growth comes off a destocked base. A book-to-bill that rolls over, or a single soft region, flows straight through a thin operating margin into earnings.

Then there is the balance sheet and the cyclicality. Net debt is roughly $2.74 billion against trailing operating income near $567 million, about 4.8x, with interest coverage around 2.3x, which is tight for a business this cyclical. The 10-K flags that inventories may decline in market value or become obsolete as demand changes, the core risk in distribution: a buildup ahead of a demand air pocket turns working capital into a writedown. Share count has shrunk at roughly 4.5% a year through buybacks, which flatters per-share figures but does not change the underlying return economics. The bet the price makes is that a low-return, cyclical, levered distributor compounds durably through the next several years. History, the margin trend, and the valuation floors all argue that is the optimistic read.

Valuation

Inverting the $91.48 price is the cleanest read. At that level the market pays about 16x company-wide operating income, which under a 9.5% cost of capital and 4% terminal growth implies operating growth of roughly 12% a year for five years. Each one-point change in the cost of capital moves the implied growth by about 6.3 points. Against the company's own record that near-term pace is within reach, and against history about half of comparable fast-growers sustained it for five years, so the assumption reads as within range. The reverse-DCF range runs from a low near $62 to a base near $69.

The model X-ray is unusually lopsided. Only the growth DCF reaches the price: a DCF exit-multiple near $140 and a discounted future market cap near $114 on 13% revenue growth. Every other frame is well below. The relative P/E mark lands near $62, EV/EBITDA relative near $57, earnings power value near $79, and the asset frames, simple and two-stage excess return, residual income, and ROIC-justified book, cluster between $15 and $28. The FCF-yield mark collapses toward zero because trailing free cash flow is minimal, a reminder that distribution earnings are working-capital-hungry.

The spread is the information. The price is not a judgment on whether Avnet is a sound business through the cycle. It is a measure of how much durable compounding the market has booked into a thin-margin, levered, cyclical distributor: about 12% operating growth for five years, with returns on capital that currently sit below the cost of that capital.

Catalysts

The near-term driver is the upcycle cadence. Q2 fiscal 2026 sales of about $6.3 billion grew 12% year over year and beat the high end of guidance, with adjusted EPS of $1.05, and management guided Q3 to $6.2 to $6.5 billion with EPS of $1.20 to $1.30. Whether the broad regional recovery, Asia up 17%, Europe up 8%, the Americas up 5%, holds is the swing factor for the next several prints.

Margin and working capital are the structural catalysts. Operating income was $187 million in Electronic Components and $20 million in Farnell, with Farnell up 24% as the higher-margin catalog business recovers faster. The watch item is whether operating margin can stabilize, given Electronic Components operating income has fallen sharply across recent fiscal years even with steady revenue. Inventory discipline through the recovery determines whether the upcycle converts to cash.

Watch book-to-bill trends, regional demand divergence, gross-margin stabilization, and balance-sheet leverage given net debt near $2.74 billion. A demand air pocket against a rebuilt inventory position is the classic distribution risk.

Sources: Avnet investor relations and GuruFocus (AVT Q2 fiscal 2026 results, ~$6.3B sales up 12%, $1.05 adjusted EPS, regional growth), The Globe and Mail and Motley Fool (Q2 fiscal 2026 call: segment operating income, Farnell up 24%, Q3 guidance $6.2 to $6.5B and $1.20 to $1.30 EPS), AlphaStreet (working-capital commentary).

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

Methodology Note

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.

View the full interactive AVT report on boothcheck