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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Avnet, Inc. (AVT - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Avnet has a trailing twelve months PE ratio of 12.55, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 compares in at about 20.33. If we focus on the stock’s long-term PE trend, the current level puts Avnet’s current PE ratio above its midpoint over the past five years, with the number having risen rapidly over the past few months.
Further, the stock’s PE also compares favorably with the Zacks classified Electronics - Parts Distribution sector’s trailing twelve months PE ratio, which stands at 13.09. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Avnet has a P/S ratio of about 0.28. This is significantly lower than the S&P 500 average, which comes in at 3.08 right now. Also, as we can see in the chart below, this is tad below the highs for this stock in particular over the past few years, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Avnet currently has a Zacks Value Style Score of ‘B’, putting it into the top 40% of all stocks we cover from this look. This makes Avnet a solid choice for value investors.
What About the Stock Overall?
Though Avnet might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘C’ and a Momentum score of ‘B’. This gives AVT a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed. The current year has seen two estimates go higher in the past sixty days compared to no lower, while the next year estimate has seen two down in the same time period.
This has had just a small impact on the consensus estimate though as the current quarter consensus estimate has inched upper by 0.6% in the past two months, while the full year estimate has decreased by 1.5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This somewhat mixed trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
Avnet is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, a good industry rank (among Top 20% of more than 250 industries) increases our confidence on the stock.
However, with a Zacks Rank #3, it is hard to get too excited about this company overall. Also, over the past two years, the Zacks Electronics - Parts Distribution industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for broader factors and the analyst sentiments to turn favorable in this name first, but once that happens, this stock could be a compelling pick.
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Is Avnet a Great Stock for Value Investors?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Avnet, Inc. (AVT - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Avnet has a trailing twelve months PE ratio of 12.55, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 compares in at about 20.33. If we focus on the stock’s long-term PE trend, the current level puts Avnet’s current PE ratio above its midpoint over the past five years, with the number having risen rapidly over the past few months.
Further, the stock’s PE also compares favorably with the Zacks classified Electronics - Parts Distribution sector’s trailing twelve months PE ratio, which stands at 13.09. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Avnet has a P/S ratio of about 0.28. This is significantly lower than the S&P 500 average, which comes in at 3.08 right now. Also, as we can see in the chart below, this is tad below the highs for this stock in particular over the past few years, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Avnet currently has a Zacks Value Style Score of ‘B’, putting it into the top 40% of all stocks we cover from this look. This makes Avnet a solid choice for value investors.
What About the Stock Overall?
Though Avnet might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘C’ and a Momentum score of ‘B’. This gives AVT a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed. The current year has seen two estimates go higher in the past sixty days compared to no lower, while the next year estimate has seen two down in the same time period.
This has had just a small impact on the consensus estimate though as the current quarter consensus estimate has inched upper by 0.6% in the past two months, while the full year estimate has decreased by 1.5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Avnet, Inc. Price and Consensus
Avnet, Inc. Price and Consensus | Avnet, Inc. Quote
This somewhat mixed trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
Avnet is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, a good industry rank (among Top 20% of more than 250 industries) increases our confidence on the stock.
However, with a Zacks Rank #3, it is hard to get too excited about this company overall. Also, over the past two years, the Zacks Electronics - Parts Distribution industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for broader factors and the analyst sentiments to turn favorable in this name first, but once that happens, this stock could be a compelling pick.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>