Over the last six months, Avnet shares have sunk to $45.83, producing a disappointing 16.4% loss - worse than the S&P 500’s 6.9% drop. This might have investors contemplating their next move.
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.
Despite the more favorable entry price, we're cautious about Avnet. Here are three reasons why we avoid 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
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Avnet grew its sales at a tepid 3.9% compounded annual growth rate. 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 suggests its newer products and services will catalyze better top-line performance, it is still below average for the sector.
3. EPS Took a Dip Over the Last Two Years
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in 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 isn’t a terrible business, but it isn’t one of our picks. Following the recent decline, the stock trades at 9.2× forward price-to-earnings (or $45.83 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. We’d suggest looking at one of our top digital advertising picks.
Stocks We Would Buy Instead of Avnet
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