Should Value Investors Buy Arrow Electronics (ARW) Stock?

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

Arrow Electronics (ARW) is a stock many investors are watching right now. ARW is currently holding a Zacks Rank #1 (Strong Buy) and a Value grade of A. The stock holds a P/E ratio of 9.44, while its industry has an average P/E of 14.15. ARW's Forward P/E has been as high as 11.05 and as low as 8.04, with a median of 9.71, all within the past year.

We also note that ARW holds a PEG ratio of 0.46. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ARW's PEG compares to its industry's average PEG of 0.47. Over the past 52 weeks, ARW's PEG has been as high as 0.55 and as low as 0.40, with a median of 0.49.

Another notable valuation metric for ARW is its P/B ratio of 0.98. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 2.14. Within the past 52 weeks, ARW's P/B has been as high as 1.22 and as low as 0.78, with a median of 1.02.

Value investors also use the P/S ratio. The P/S ratio is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. ARW has a P/S ratio of 0.29. This compares to its industry's average P/S of 0.5.

Finally, investors should note that ARW has a P/CF ratio of 9.63. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. ARW's P/CF compares to its industry's average P/CF of 16.90. Over the past 52 weeks, ARW's P/CF has been as high as 11.55 and as low as 8.13, with a median of 10.03.

These are only a few of the key metrics included in Arrow Electronics's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, ARW looks like an impressive value stock at the moment.

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This article originally published on Zacks Investment Research (zacks.com).

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