Yahoo Finance Here's Why We Think Arrow Electronics (NYSE:ARW) Might Deserve Your Attention Today
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Arrow Electronics (NYSE:ARW). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Arrow Electronics with the means to add long-term value to shareholders.
See our latest analysis for Arrow Electronics
How Fast Is Arrow Electronics Growing Its Earnings Per Share?
Over the last three years, Arrow Electronics has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. In impressive fashion, Arrow Electronics' EPS grew from US$13.14 to US$23.55, over the previous 12 months. It's not often a company can achieve year-on-year growth of 79%.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. EBIT margins for Arrow Electronics remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 8.6% to US$37b. That's encouraging news for the company!
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Arrow Electronics' forecast profits?
Are Arrow Electronics Insiders Aligned With All Shareholders?
Since Arrow Electronics has a market capitalisation of US$6.5b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. To be specific, they have US$35m worth of shares. That's a lot of money, and no small incentive to work hard. Despite being just 0.5% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. The median total compensation for CEOs of companies similar in size to Arrow Electronics, with market caps between US$4.0b and US$12b, is around US$8.2m.
Arrow Electronics offered total compensation worth US$5.4m to its CEO in the year to December 2021. That comes in below the average for similar sized companies and seems pretty reasonable. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.
Is Arrow Electronics Worth Keeping An Eye On?
Arrow Electronics' earnings per share have been soaring, with growth rates sky high. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The strong EPS improvement suggests the businesses is humming along. Arrow Electronics certainly ticks a few boxes, so we think it's probably well worth further consideration. We don't want to rain on the parade too much, but we did also find 4 warning signs for Arrow Electronics (3 shouldn't be ignored!) that you need to be mindful of.
The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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