AVNET INC (AVT) stock intrinsic value fair value estimate & owner earnings analysis

Avnet is one of the world's largest distributors of electronic components. It buys chips and other parts from manufacturers, warehouses them and sells them to equipment makers through its Electronic Components business and its Farnell catalogue business. In fiscal 2026 (ended June 27, 2026) sales were $27.6 billion, up 24% from $22.2 billion. Roughly half of sales are booked in Asia, a little over a quarter in Europe, the Middle East and Africa (Germany is named separately) and just under a quarter in the Americas, almost all of it the United States. Because so much of the business sits in Asia, trade policy matters; the filing notes the U.S. Supreme Court's February 2026 ruling striking down the emergency-powers tariffs, and says tariff-related billings to customers were under 1% of sales. How we measured earning power. Avnet's reported cash flow lurches with the chip cycle because it must fund receivables and inventory when sales rise and releases cash when they fall. In fiscal 2026 operating cash flow was negative $281 million even though net income was $334 million, because receivables (+$2.6 billion) and inventory (+$0.9 billion) grew and payables (+$2.6 billion) only partly offset it. We remove those working-capital swings, then deduct stock compensation, the spending needed to stand still (only the growth-related slice of capital spending is excluded) and the cost of operating leases, and finally add back the cash interest paid so we see what the business earns before its lenders are paid. Lenders are then paid out of the business value, as described below. Per share, this pre-lender cash flow was: FY2019 $5.33, FY2020 $3.70, FY2021 $4.35, FY2022 $8.68, FY2023 $10.21, FY2024 $7.80, FY2025 $4.26 and FY2026 $7.68. We used the median of FY2019 to FY2026, $6.51 per share or about $543 million a year. That window holds the 2020 downturn, the 2022-23 shortage boom, the 2025 trough and the 2026 recovery, so it covers a full cycle. We left out fiscal 2018 and earlier because Avnet sold its Technology Solutions business in early 2017 and was still in transition. The last three years averaged about $577 million a year, so the anchor is not lifted by the shortage years. The cash interest we add back rose from about $100 million a year around 2018 to about $270 million in FY2026 as debt and rates rose, and the same debt is subtracted in full below. Amortization of acquired intangibles is now negligible (about $6 million in FY2023), so no wasting-asset adjustment was needed. Growth check. Pre-lender cash flow per share rose about 80% in FY2026 ($4.26 to $7.68). Our base case starts at $6.51, below the FY2026 level, and credits no growth after that. We credit no growth in any case: nothing is contracted or backlogged, and the growth Avnet has produced has come with large swings and needed extra working capital funded by debt. We left out management's expectation of roughly 10% sequential sales growth in the September 2026 quarter and the AI and memory upcycle, since neither is secured. Buybacks are also not credited: the credit agreement was amended in August 2025 to temporarily raise the allowed leverage ratio through September 2026 and it caps repurchases at $100 million, a limit already reached. What each case assumes and what it is worth. Base: the business keeps earning the cycle-median $6.51 per share indefinitely, supported by a record of distributing components since 1921, including through the 2020 and 2025 downturns. The business is worth about $9.05 billion ($108.50 a share). It owes about $3.10 billion ($37.14 a share), so the shares are worth about $71.36. Bear: the weak-year level of $3.70 per share (FY2020) becomes permanent, and the roughly $2.0 billion of debt that is not fixed at low coupons costs one percentage point more to refinance. The business is worth about $5.14 billion ($61.67 a share); it owes about $3.24 billion ($38.89 a share), leaving about $22.77. In this case business cash flow of about $309 million only just covers roughly $270 million of interest, so it assumes lenders keep rolling the debt, as they did in FY2025 when cash flow before lenders of about $372 million covered $288 million of interest and lenders agreed in August 2025 to loosen the leverage covenant rather than call the debt. Bull: Avnet holds the FY2026 level of $7.68 per share, which it has already delivered under current conditions. The business is worth about $10.68 billion ($128.00 a share). At that value the $650 million convertible notes would convert into about 9.25 million new shares, leaving debt of about $2.54 billion and about 92.7 million shares, or about $87.78 a share. Debt. Total debt at June 27, 2026 was $3.21 billion ($3.23 billion principal); the $155 million of cash is treated as needed to run the business. Maturities by fiscal year are $734 million in 2027, $593 million in 2028 (including the 6.25% notes), $560 million in fiscal 2030 (the revolving credit facility matures in January 2030), about $953 million in 2031 (including the 1.75% convertible notes due September 2030, convertible at $70.27 a share, and 3.00% notes) and about $307 million after that (5.50% notes due 2032). In August 2026, after year-end, Avnet took a $375 million variable-rate term loan maturing July 2028; we did not establish what the proceeds were used for and assumed it refinances existing borrowings, leaving net debt unchanged. Fixed coupons well below 6% (the convertible, the 3.00% and 5.50% notes) are worth about $135 million against a 6% yardstick, which we deduct from the debt figure. Debt is treated as debt in the base and bear cases; the convertible would convert only if shares were worth well over $70.27, which happens in the bull case; the base value per share is close to that conversion price, so we left it as debt. Testing the base case. If the two shortage years (FY2022 and FY2023) were excluded, the median of the remaining six years would fall to $4.84 and the base value to roughly $43.53 a share, so the result depends heavily on those years being part of a normal cycle. We kept them because a cyclical must be judged over a full cycle, and because FY2024 to FY2026 averaged above the anchor even after the shortage ended. One item we set aside rather than reconciled: FY2017 is not used because the sale of Technology Solutions mixes discontinued operations and a large gain into that year's figures. Change since our previous review in August 2026 (bear $16.60, base $75.20, bull $130.30). The base is a little lower and the bull much lower because we now discount everything at a uniform 6%, credit only cash flow Avnet has actually delivered, take out working-capital swings, and subtract debt separately rather than assuming today's borrowings continue. The bear is higher because it is built from a weak year Avnet has actually reported rather than from a one-year collapse, though it now also carries higher refinancing costs.