Summary
- A global player trading at around 10x LTM earnings.
- A look at the fundamentals, variety of valuation methods, guidance, historical guidance and headwinds.
- Investors interested can profit by focusing on the low end of the valuation and the 200-day MA.
Avnet (NYSE:AVT) is a global electronics distributor and along with competitor Arrow Electronics (NYSE:ARW) control 60% of the market in North America and Europe. The company operates through two segments: Electronic Marketing (60% of sales) and Technology Solutions (40%). Electronic marketing sells semiconductors, IP&E (interconnect passive & electromagnetic) devices while Technology solutions sells enterprise services and solutions.
The company has done 96 acquisitions since 1991, while over the past five years (according to Morningstar) has spent $1.5 billion on 37 acquisitions with $7 billion in revenue. If we look at 2010 and 2015 sales we see that they grew from $19b to $28b, so it looks like the majority of that growth came from those acquisitions. If we assume that the $2b growth left over from the $9b increase was organic then that would imply 2% annual growth per year. During that same period, operating profits rose by 39%. So far so good, however if we start at 2011 (instead of 2010) then we see a company with hardly any growth and a decline in operating profit. So despite spending $700m in cash alone for the last 4 year on acquisitions, the company has not moved the needle.
