ticker: AVT layer: L10-Distribution verdict: red verify_date: 2026-05-28 #

Avnet Inc (AVT NASDAQ) — Graham Screen #

Screened 2026-05-28. Price USD 87.20.

PRICE CHECK — ABBREVIATED TRIGGER ASSESSMENT #

Abbreviated trigger (YTD >80% AND within 10% of high): NOT triggered — 77.7% is below 80% threshold. Proceeding to FULL screen.

vs ARW: AVT +77.7% vs ARW +90.8%, a 13pt lag despite similar business mix. AVT's thinner margins and lower ROE likely explain the valuation discount. Both stocks have substantially rerated off cycle lows — this is no longer a "cycle bottom" entry.

1. Price & Returns #

The stock has more than doubled off its Nov 2025 trough (~$44). Momentum picked up sharply on Q3 FY2026 beat. Current price is 3.3% below the 52-week high set in mid-May 2026.

2. Valuation Multiples #

shr-003 Observation: Trailing P/E 33.6x vs forward 11.0x — a 22.6-point gap. The market is pricing a profitability inflection (FY2025 trough → FY2026 cycle recovery), not sustained high growth. Per shr-003, the large gap reveals entry timing risk: if the inflection materializes, the stock is fair; if macro turns, forward EPS misses badly.

shr-017 Cyclical trap warning: High score on cycle-trough trailing data doesn't mean value persists. AVT's FY2023 peak EPS was $8.26 — the stock now trades at 10.6x peak earnings. The forward EPS of $7.89 is essentially a return to FY2023 peak, which the cycle already reached once and subsequently gave back entirely.

3. Quarterly Revenue & Earnings Trend (Cycle Recovery Evidence) #

Revenue has recovered from ~$5.3B trough to $7.12B (+34%). Q3 FY2026 beat consensus by 12.3% on EPS. Consecutive beat streak: 4 of 4 quarters beat, average +10% upside. The recovery is real and accelerating. However, the stock price has already fully reflected this — YTD +78%.

Annual context: | Year | Revenue | EPS (diluted) | |---|---|---| | FY2022 | $24.3B | $6.94 | | FY2023 (peak) | $26.5B | $8.26 | | FY2024 | $23.8B | $5.43 | | FY2025 (trough) | $22.2B | $2.75 (charges) |

4. (a) Book-to-Bill / Inventory Commentary #

From Q3 FY2026 (Mar 26) earnings and recent news coverage (May 2026):

• Revenue recovery is inventory-driven: Q3 FY2026 revenue accelerated +12.7% QoQ. Inventory at Q3 FY2026: $5.46B (down from $5.47B in FY2023 peak), suggesting de-stocking cycle largely complete.
• Farnell (ECS Europe): Analyst commentary (Zacks, May 19) notes Farnell (design-chain unit) remains soft; recovery concentrated in Electronic Components (EC) Americas where AI-adjacent demand is restarting procurement cycles.
• Book-to-bill: Not directly disclosed in available data, but sequential revenue acceleration +12.7% in Q3 FY2026 implies book-to-bill >1.0 for at least 2 quarters.
• Accounts Receivable at Mar 2026: $5.50B (vs $4.33B Jun 25 and $4.39B Jun 24) — +27% surge QoQ, consistent with a strong billing quarter but also creates collection risk if demand softens in Q4.

5. (b) ECS vs EM Segments #

Avnet operates two segments:

EC (Americas): Primary driver of the Q3 FY2026 beat. AI and data center infrastructure driving renewed procurement cycles for semiconductors. AVT has less hyperscaler exposure than TD SYNNEX (IT distribution) but benefits from embedded/industrial restocking.

Farnell: Drag unit. European industrial softness, FX headwinds (GBP/EUR exposure). Analyst note (May 19): "Can Recovery in Farnell Accelerate Avnet's Margin Expansion?" — the title itself implies Farnell remains uncertain.

Relative to ARW: ARW concentrates in EC and IT solutions (higher-value EMS services). AVT's Farnell segment introduces lower-growth catalog distribution drag that ARW doesn't carry. This structurally explains AVT's 0.8x lower operating margin vs ARW (2.9% vs 4.2%) and lower ROE (4.3% vs 11.3%).

6. (c) Margin Trajectory vs ARW #

AVT margins are structurally below ARW. Even at cycle peak (FY2023), AVT's op margin (~4.6%) barely matched ARW's current level (~4.2%). The structural gap is Farnell's lower-margin catalog business and AVT's historical SG&A intensity. At the current 2.9% op margin (cycle recovery), AVT is pricing in a return toward the FY2023 peak — but that peak required a $26.5B revenue base that may not recur near-term given semiconductor demand normalization.

Margin trajectory direction: Up (from 1.3% trough → 2.9% now). But the rate of improvement will slow as easy comparables fade. Q4 FY2026 (Jun 26) faces the easiest comp (only $73M op income), so Q4 will look explosive. After that, FY2027 comparables get tougher.

7. Balance Sheet (Q3 FY2026, Mar 2026) #

Leverage concern: Net Debt/EBITDA of 4.32x is elevated. At cycle trough EBITDA (~$400-450M), this would spike toward 6-7x. However, EBITDA is clearly recovering, and debt maturity profile is manageable (no near-term cliff evident). The 2.01x current ratio is strong.

Free Cash Flow History: | Year | FCF | |---|---| | FY2022 | -$268M (inventory build) | | FY2023 | -$908M (inventory supercycle absorption) | | FY2024 | +$464M | | FY2025 | +$577M | | Q3 FY2026 (TTM) | ~$200-300M (recovering, Q1 FY2026 was -$71M due to WC build) |

FCF is positive but lumpy. Distributor FCF is inherently cyclical (inventory absorbs cash on the way up, releases on the way down).

8. Graham 7 Defensive Filters (shr-017) #

Score: 5/7 traditional filters (3 FAIL: #5 EPS growth, #6 P/E, #7b product)

shr-017 cyclical trap note: Filters 1-4 pass easily because they use trailing/historical data from a recovering cycle. Filter 5 fails because the 10-year EPS has declined — FY2025 $2.75 is below estimated FY2015 EPS of ~$3-4. Filter 6 fails on any realistic current-EPS basis. The headline score (5/7) overstates value quality because forward EPS ($7.89) would pass F6 and F7b — but forward EPS is a recovery estimate, not a proven run-rate.

9. Graham Intrinsic Value (shr-003, shr-012) #

AAA Corporate Bond Yield assumption: 5.0% → multiplier: 0.880 Formula: V = EPS × (8.5 + 2g) × (4.4/5.0)

A. Trailing EPS (FY2025 reported, $2.59 — distorted by charges): #

B. TTM Normalized EPS ($4.18, last 4 reported GAAP quarters): #

C. Forward Consensus EPS ($7.89 — full cycle recovery priced in): #

shr-003 analysis: The 22.6-point P/E gap (trailing 33.6x → forward 11.0x) reveals the market has pre-priced the full profitability inflection. The forward IV table looks attractive only because $7.89 is itself a peak-cycle estimate — AVT's FY2023 peak was $8.26 and was not sustained. A conservative investor should weight the TTM normalized column, where the stock is expensive even at 7.5% perpetual growth.

10. shr-020 Same-Day Red Flag Check #

Run date: 2026-05-28

Summary flags: 1 RED (insider selling pattern), 3 AMBER, 5 GREEN.

Critical RED — shr-002: CEO + CFO + GC + CTO have all sold open-market in the $61-$86 range over the past 4 months. This is the multi-C-suite systematic selling pattern that shr-002 classifies as a far stronger bearish signal than any single sale. The only insider buy was the CFO at $46.75 in November 2025 — at the trough, not here. Management is treating current prices as exit levels.

11. Graham Growth Addendum (shr-004) #

For stocks failing defensive filters, the growth addendum test: buy only when implied growth (from P/E) ≤ believed achievable growth.

• Break-even growth on TTM normalized EPS: 7.6% perpetual growth required to justify $87.20
• Break-even growth on forward EPS: 2.0% (trivial, but forward EPS itself may not land)
• AVT's realistic long-run EPS growth: Electronic component distribution is a 3-5% topline growth business (GDP-linked, some outsourcing tailwinds). At 1-3% net margin, EPS growth depends heavily on buybacks and cycle position. Post-cycle-normalization sustainable growth is 4-6% in an optimistic scenario.
• Conclusion: On TTM EPS, 7.6% required vs 4-6% achievable — FAIL by margin. On forward EPS, 2.0% required — PASS, but only if $7.89 actually delivers.

12. Peer Comparison: AVT vs ARW #

Structural disadvantage: AVT has lower margins, lower ROE, and lower analyst coverage relative to ARW. The only advantage is the dividend and a slightly lower P/B. ARW's trailing P/E of 15.5x is substantially cheaper than AVT's 33.6x on the same cyclical basis. AVT is the lower-quality comp even before price considerations.

13. Portfolio Fit Assessment #

• Current satellite: EUR 2,167 deployed (AGN.AS/RI.PA/AIG/AKE.PA). Theoretical remaining capacity: ~EUR 833 (vs EUR 3,000 max).
• AVT in USD: At EUR 500 starter (shr-010), this is ~$540 at current EUR/USD ~1.085 = ~6 shares.
• USD exposure: Portfolio already has AIG (USD-denominated). Adding AVT adds a second USD position.
• Sector: Technology/Distribution — different from existing holdings (Financial Services, Consumer Staples, Specialty Chemicals). Diversification is slightly positive.
• Competition with existing positions: EUR 833 remaining budget also needs to fund RI.PA T2 (~EUR 220 deferred) and eventual KLSE execution. AVT competes for scarce satellite capital.

VERDICT #

VERDICT LINE: RED — DO NOT BUY. Stock has rerated +78% YTD and is 3.3% from 52w high. The cycle-bottom thesis that applied at $44 is fully priced. Graham IV is negative on trailing and TTM EPS; forward EPS ($7.89) implies Graham IV >$87 only at g≥3%, but forward EPS assumes a full cycle recovery to FY2023 peak levels — historically not sustained. CEO+CFO+GC+CTO have all sold open-market in the $61-$86 range (shr-002 multi-C-suite sell = strong bearish signal). Analyst mean PT $89 offers <2.5% upside from current. ARW is structurally higher quality (2x ROE, higher margins) and also fully priced (+91% YTD). Both distributors are late-cycle reentry candidates — neither is a value buy today. Watchlist trigger: below $60 (TTM P/E ~14x, Graham product ~19x, close to filter pass) with insider buying confirmation. Layer: L10-Distribution, revisit at cycle trough if conditions reset.

Data sources: yfinance (historical prices, financials, balance sheet, cashflow, dividends, insider transactions), screened 2026-05-28.