Avnet trades at $49.99 per share and has stayed right on track with the overall market, losing 7.3% over the last six months while the S&P 500 is down 6.9%. This may have investors wondering how to approach the situation.
Is there a buying opportunity in Avnet, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Even with the cheaper entry price, we're cautious about Avnet. Here are three reasons why there are better opportunities than AVT and a stock we'd rather own.
Why Is Avnet Not Exciting?
With a century-long history of adapting to technological evolution, Avnet (NASDAQ:AVT) is a global electronic components distributor that connects manufacturers of semiconductors and other electronic parts with businesses that need these components.
1. Long-Term Revenue Growth Disappoints
A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Regrettably, Avnet’s sales grew at a tepid 3.9% compounded annual growth rate over the last five years. This fell short of our benchmark for the business services sector. 
2. Projected Revenue Growth Shows Limited Upside
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Avnet’s revenue to stall. Although this projection indicates its newer products and services will spur better top-line performance, it is still below the sector average.
3. EPS Took a Dip Over the Last Two Years
While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.
Sadly for Avnet, its EPS declined by more than its revenue over the last two years, dropping 37.1%. This tells us the company struggled to adjust to shrinking demand.
Final Judgment
Avnet’s business quality ultimately falls short of our standards. Following the recent decline, the stock trades at 9.7× forward price-to-earnings (or $49.99 per share). While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're fairly confident there are better stocks to buy right now. Let us point you toward the most dominant software business in the world.
Stocks We Would Buy Instead of Avnet
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