Since December 2024, Avnet has been in a holding pattern, posting a small loss of 2.6% while floating around $52.33.
Is there a buying opportunity in Avnet, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think Avnet Will Underperform?
We're sitting this one out for now. Here are three reasons why we avoid AVT and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Avnet grew its sales at a mediocre 4.1% compounded annual growth rate. This fell short of our benchmark for the business services sector. 
2. 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 30.9%. This tells us the company struggled to adjust to shrinking demand.
3. Breakeven Free Cash Flow Limits Reinvestment Potential
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Avnet broke even from a free cash flow perspective over the last five years, giving the company limited opportunities to return capital to shareholders.
Final Judgment
Avnet falls short of our quality standards. That said, the stock currently trades at 10.3× forward P/E (or $52.33 per share). This valuation multiple is fair, but we don’t have much confidence in the company. There are better stocks to buy right now. We’d recommend looking at the most entrenched endpoint security platform on the market.
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