Stock Analysis & Valuation Arrow Electronics, Inc. (0HI1.L)

• Previous Close: £132.37
• Sector Valuation Confidence Level: Low

Valuation method	Value, £	Upside, %
Artificial intelligence (AI)	79.80	-40
Intrinsic value (DCF)	42.39	-68
Graham-Dodd Method	81.00	-39
Graham Formula		n/a

Strategic Investment Analysis

Company Overview

Arrow Electronics, Inc. (LSE: 0HI1.L) is a global leader in electronic components and enterprise computing solutions, serving industrial and commercial markets across the Americas, Europe, the Middle East, Africa, and the Asia Pacific. Founded in 1935 and headquartered in Centennial, Colorado, Arrow operates through two key segments: Global Components and Global Enterprise Computing Solutions. The Global Components segment distributes semiconductors, passive components, and computing products, while the Global Enterprise Computing Solutions segment offers datacenter, cloud, security, and analytics solutions. With a strong focus on value-added services like engineering support, logistics, and training, Arrow serves OEMs, value-added resellers, and contract manufacturers. As a critical player in the technology hardware and equipment sector, Arrow Electronics bridges the gap between manufacturers and end-users, ensuring seamless supply chain integration and innovation-driven solutions.

Investment Summary

Arrow Electronics presents a mixed investment profile. With a market cap of $6.18B and revenue of $27.92B, the company demonstrates scale in the competitive electronics distribution sector. However, its net income of $392M and diluted EPS of $7.29 reflect modest profitability margins. The company's beta of 1.106 suggests moderate volatility relative to the market. While Arrow generates strong operating cash flow ($1.13B), its high total debt ($3.39B) and lack of dividend payouts may deter income-focused investors. The company's global reach and diversified product portfolio provide resilience, but investors should weigh its exposure to cyclical demand in electronics and enterprise IT spending.

Competitive Analysis

Arrow Electronics competes in a fragmented but highly competitive electronics distribution and enterprise solutions market. Its primary competitive advantage lies in its global scale, extensive supplier relationships, and value-added services like engineering support and logistics. The company's dual-segment approach allows it to serve both component-level and enterprise IT needs, differentiating it from pure-play distributors. However, Arrow faces pricing pressure from larger rivals like Avnet and smaller, niche-focused distributors that offer specialized technical expertise. In the enterprise computing segment, Arrow competes with broadline IT distributors and direct cloud service providers, requiring continuous investment in high-margin solutions like security and analytics. The company's ability to integrate components and computing solutions under one umbrella provides cross-selling opportunities but also demands significant operational complexity. Arrow's lack of a dividend may limit its appeal compared to some peers, but its strong cash flow generation supports debt management and strategic investments in digital transformation initiatives.

Major Competitors

• Avnet, Inc. (AVT): Avnet is Arrow's closest competitor, with a similar global footprint in electronic components distribution. Avnet's strengths include a slightly larger scale and deeper supplier relationships in certain regions. However, Arrow often outperforms Avnet in enterprise computing solutions, where Arrow's ECS segment has shown stronger growth. Both companies face margin pressures, but Avnet's recent restructuring efforts may improve its cost efficiency.
• WPG Holdings (WPG.L): WPG Holdings is a major Asia-focused electronics distributor, posing strong regional competition to Arrow in the APAC market. WPG's strength lies in its local supply chain networks and cost advantages, but it lacks Arrow's global reach and enterprise computing capabilities. WPG's focus on semiconductor distribution makes it a formidable competitor in components but less so in integrated solutions.
• TD Synnex Corp (SNX): TD Synnex is a key competitor in Arrow's enterprise computing segment, with a broad portfolio of IT solutions and services. Synnex's strengths include strong vendor partnerships and a focus on high-growth areas like cloud and IoT. However, Arrow's deeper engineering support capabilities and component distribution business provide more diversified revenue streams compared to Synnex's IT-centric model.
• Tech Data Corporation (TECD): Now part of TD Synnex, Tech Data was a major competitor in IT distribution with strengths in logistics and vendor management. While no longer independent, its legacy operations continue to pressure Arrow in enterprise solutions, particularly in Europe and North America. Arrow differentiates with its combined components and computing offerings, which Tech Data lacked.