Value
7.9/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 8.2 |
| P/S | 10.0 |
| EV/EBITDA | 6.1 |
| Fwd P/E | 9.4 |
| PEG | 10.0 |
| Analyst target | 4.0 |
- ▸Forward P/E: 9.3x
- ▸PEG: 0.05
- ▸Attractively valued
ARW · Why this verdict
Why Arrow Electronics (ARW) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score6.2/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Approximately 70% of revenue is concentrated in the global components segment, a single product area highly sensitive to semiconductor and electronics inventory cycles. A demand or pricing downturn in this category would disproportionately impair total revenue with limited offset from other business lines. Risk breakdown | Global components revenue contribution holds stable or grows for at least two consecutive reported quarters, demonstrating resilience in the core segment. | →Stable |
| CounterGlobal components dominance also means the business is a direct beneficiary of secular demand growth in semiconductors and electronics; the concentration that creates risk in downturns also creates outsized upside in upcycles. | ||
Free cash flow represents only 36% of reported net income, a disparity explicitly flagged as an earnings quality concern. Profits that are not converting into cash at a reasonable rate raise questions about working-capital dynamics and the sustainability of the reported profit level, regardless of the attractive headline multiples. Quality breakdown | Free cash flow rises above 70% of net income for two consecutive quarters, demonstrating that earnings are translating into real cash generation. | →Stable |
| CounterElectronics distribution businesses carry large working-capital swings tied to inventory timing; a single quarter of destocking or accounts-receivable collection could rapidly close the free-cash-flow-to-earnings gap without any change in underlying profitability. | ||
The stock is trading above its near-term resistance target, producing a risk/reward ratio where potential downside exceeds remaining upside. The current setup does not support new capital deployment, and adding exposure at current prices carries an unfavorable reward-to-risk relationship. Price targets | Price retraces below $207, restoring more than 10% upside to the near-term resistance level and creating a constructive entry geometry. | →Stable |
| CounterStrong earnings beats averaging over 32% per quarter can justify resistance resets higher; if the growth trajectory holds, the next technical target would reprice the stock favorably from current levels. | ||
All four of the most recent quarters have beaten consensus estimates, with an average positive surprise of roughly 32% and the latest quarter delivering 83% upside to the estimate. This cadence of consistent and material outperformance suggests guidance discipline and operational execution that the market has been slow to price in. Catalyst breakdown | EPS surprise remains positive for at least two more consecutive quarters, sustaining the beat streak and supporting further upward estimate revisions. | →Stable |
| CounterThe elevated put/call ratio of 1.63 and high implied volatility of 87% signal that sophisticated options market participants are hedging downside risk even amid the beat streak; a single miss after four large beats could lead to a sharp re-rating lower. | ||
Approximately 70% of revenue is concentrated in the global components segment, a single product area highly sensitive to semiconductor and electronics inventory cycles. A demand or pricing downturn in this category would disproportionately impair total revenue with limited offset from other business lines.
→StableRisk breakdown
- Expectation
- Global components revenue contribution holds stable or grows for at least two consecutive reported quarters, demonstrating resilience in the core segment.
CounterGlobal components dominance also means the business is a direct beneficiary of secular demand growth in semiconductors and electronics; the concentration that creates risk in downturns also creates outsized upside in upcycles.
Free cash flow represents only 36% of reported net income, a disparity explicitly flagged as an earnings quality concern. Profits that are not converting into cash at a reasonable rate raise questions about working-capital dynamics and the sustainability of the reported profit level, regardless of the attractive headline multiples.
→StableQuality breakdown
- Expectation
- Free cash flow rises above 70% of net income for two consecutive quarters, demonstrating that earnings are translating into real cash generation.
CounterElectronics distribution businesses carry large working-capital swings tied to inventory timing; a single quarter of destocking or accounts-receivable collection could rapidly close the free-cash-flow-to-earnings gap without any change in underlying profitability.
The stock is trading above its near-term resistance target, producing a risk/reward ratio where potential downside exceeds remaining upside. The current setup does not support new capital deployment, and adding exposure at current prices carries an unfavorable reward-to-risk relationship.
→StablePrice targets
- Expectation
- Price retraces below $207, restoring more than 10% upside to the near-term resistance level and creating a constructive entry geometry.
CounterStrong earnings beats averaging over 32% per quarter can justify resistance resets higher; if the growth trajectory holds, the next technical target would reprice the stock favorably from current levels.
All four of the most recent quarters have beaten consensus estimates, with an average positive surprise of roughly 32% and the latest quarter delivering 83% upside to the estimate. This cadence of consistent and material outperformance suggests guidance discipline and operational execution that the market has been slow to price in.
→StableCatalyst breakdown
- Expectation
- EPS surprise remains positive for at least two more consecutive quarters, sustaining the beat streak and supporting further upward estimate revisions.
CounterThe elevated put/call ratio of 1.63 and high implied volatility of 87% signal that sophisticated options market participants are hedging downside risk even amid the beat streak; a single miss after four large beats could lead to a sharp re-rating lower.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Four consecutive large earnings beats averaging roughly 32% upside and 39% year-over-year growth demonstrate strong execution, but the stock is trading above its near-term resistance target with a negative risk/reward, free cash flow converts at only 36% of reported net income, and 70% revenue concentration in global components leaves the earnings stream acutely exposed to inventory and demand cycles.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
3.1/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 3.8 |
| ROA | 1.7 |
| Gross margin | 0.0 |
| Op margin | 1.7 |
| Net margin | 1.1 |
| Current ratio | 4.7 |
| FCF quality | 2.9 |
| Moat | 5.6 |
| Piotroski F | 6.7 |
- ▸Earnings quality RED FLAG: 36% FCF/NI
Growth
10.0/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 10.0 |
| EPS growth | 10.0 |
- ▸Strong growth: 39% YoY
Momentum
3.8/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 8.5 |
| MACD | 0.0 |
| OBV | 1.0 |
| MA position | 4.0 |
| Volume | 5.7 |
- ▸Uptrend pullback (RSI 30) - buy opportunity
- ▸Volume distribution (falling OBV)
- ▸Above 200-day MA
Sentiment
6.2/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 6.6 |
| erm sentiment | 7.6 |
- ▸Estimates rising as sentiment proxy (+6.5%)
Insider
3.4/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 3.0 |
| insider conviction | 2.0 |
| holder change | 5.1 |
- ▸Notable insider selling — $10,547,220 (0.104% of mkt cap)
Peer rank
5.0/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 7.1 |
| quality rank | 4.3 |
| growth rank | 8.6 |
- ▸Attractive P/E vs peers
- ▸Industry growth leader
Technical
8.7/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 10.0 |
| support resistance | 9.6 |
| 52w position | 6.6 |
Risk (lower is worse)
6.2/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 8.7 |
| days to cover | 9.2 |
| volatility | 2.5 |
| put call | 4.3 |
| implied vol | 3.5 |
| max pain risk | 7.0 |
| beta | 6.2 |
| debt equity | 8.6 |
- ▸Concentration risks: 1 HIGH, 1 MED (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
Catalyst
8.4/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 8.5 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 10.0 |
- ▸Estimates up 6.5% (30d)
- ▸Perfect beat streak: 4Q
How the verdict was assembled
Engine trigger
Quality below minimum threshold.
Engine technical detail
verdict_path:
L1:HARD_BLOCKPassed (6)
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:27d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (2)
- MOMENTUM:3.8<4.5
- ASYMMETRY:-0.7=NEGATIVE
Warning (0)
none
Reward-to-Risk
-0.69
Upside
-5.5%
Downside
8.0%
Sizing output
AVOID
Setup— — No clear chart pattern; technical signals are mixed
EdgeCatalyst-Driven — Earnings in 27d with 4/4 beat streak
SuitabilityModerate — Balanced profile
Investment implication
The L1 gate blocked the positive-verdict path: a hard-floor threshold was breached, so dimensional pillars — including Growth at 10.0 could not lift the engine output above the verdict floor. Failed gate signal: MOMENTUM:3.8<4.5.
The strongest dimensions are Growth at 10.0, Technical at 8.7, and Catalyst at 8.4; the weakest are Quality at 3.1, Insider at 3.4, and Momentum at 3.8. The V9 engine flagged 2 failed gates, producing an asymmetric reward-to-risk of -0.69 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Fcf Quality Red Flag
Trip ifFree cash flow rises above 70% of net income for 2 consecutive quarters, demonstrating restored earnings quality.
- P2Price Above Resistance Negative Asymmetry
Trip ifPrice falls below $207, restoring more than 10% upside to the near-term resistance target.
- P3Product Concentration Cyclical Exposure
Trip ifRevenue from the global components segment falls below 60% of total revenue for 2 consecutive quarters, indicating meaningful portfolio diversification.
- P4Strong Earnings Beat Streak
Trip ifEPS surprise falls below 0% for 2 consecutive quarters, breaking the beat streak.