What’s Behind Arrow Electronics Stock’s 1.7x Rise Since Late 2018?

July 20th, 2022 · by Trefis Team
ARWYTD+119.6%SPYYTD+13.5%QQQYTD+22.3%
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Arrow Electronics Inc. (NYSE: ARW) stock price rose 1.7x from $69 in 2018 end to around $117 currently, primarily due to favorable changes in its sales and P/S multiple. During this period, the company witnessed a steady 18% rise in revenues, and combined with a higher P/S multiple and a strong drop in the outstanding share count, the company’s stock price has rallied. Additionally, over the same period, the S&P 500 returned around 58%, meaning that ARW stock managed to outperform the broader markets since 2018-end.

In our interactive dashboard, Why Arrow Electronics Stock Moved: ARW Stock Has Gained 70% Since 2018, we break down the factors behind this move.

(A) Arrow’s Total Revenue has grown 18% from $29.7 billion in FY 2018 to $35.2 billion on an LTM basis

  • Arrow’s total revenue initially fell from $29.7 billion in FY 2018 to $28.9 billion in FY ’19 and further to $28.7 billion in FY ’20 primarily due to the semiconductor supply glut.
  • However, sales jumped in FY 2021, rising to $34.5 billion, due to strong demand from various industries, and sales currently stand higher at $35.2 billion on an LTM basis.
  • The company is a distributor of electronic components and computer products, with global components sales making up around 76% of FY ’21 total sales at $26.4 billion.
  • For additional details about Arrow’s revenues and comparison to peers, see Arrow Electronics (ARW) Revenue Comparison

(B) Revenue per share (RPS) increased 54% from $336.84 in FY 2018 to $518.68 currently

  • ARW revenue rose from $29.7 billion in 2018 to $35.2 billion currently, while the outstanding share count decreased from 88.1 million in 2018 to around 67.8 million currently.
  • Due to this, RPS has jumped from $336.84 in FY ’18 to $518.68 currently.

(C) Price-To-Sales (P/S) multiple for ARW rose strongly from 0.15x in 2018 to 0.26x by 2021 end, but has pulled back to 0.23x currently, still almost 1.5x higher than its 2018 level

  • Arrow’s P/S multiple rose steadily to 0.26x by late 2021, on the back of rising investor expectations surrounding increased semiconductor sales, and strong demand growth for the company’s products.
  • However, due to current geopolitical tensions and the increased economic uncertainty weighing on the broader markets, the P/S multiple has pulled back, currently standing at around 0.23x.
  • For additional details about the company stock returns and comparison to peers, see Arrow Electronics (ARW) Stock Return Comparison.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

 Returns Jul 2022
MTD [1]		 2022
YTD [1]		 2017-22
Total [2]
 ARW Return 5% -13% 64%
 S&P 500 Return 4% -17% 76%
 Trefis Multi-Strategy Portfolio 7% -17% 227%

[1] Month-to-date and year-to-date as of 7/20/2022
[2] Cumulative total returns since the end of 2016

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