Teledyne Technologies (TDY) 1% Above Fair Value After Defense And Space Wins?
Teledyne Technologies (TDY) has been busy. New contracts in European unmanned systems, fresh imaging hardware on European Space Agency missions, and a 3D Time-of-Flight camera launch are all nudging investors to reassess the stock.
Recent contract wins and space imaging deployments sit against a mixed tape for Teledyne Technologies, with the share price at US$609.08 after a 1-day share price return of 0.93% and a 7-day share price return of 2.00%, yet down 4.26% over 30 days and slightly lower over 90 days. Despite that short-term softness, the year-to-date share price return of 17.41% and a 3-year total shareholder return of 46.81% point to momentum that has been building over a longer stretch, supported by periodic news such as the Jefferies conference appearance and fresh product launches.
Compare Teledyne Technologies' contract wins and space exposure with other specialist industrials by scanning our hand picked list of list of solid balance sheet and fundamentals (23 results).
After a strong run this year and fresh wins in space imaging and European defense, the question around Teledyne Technologies is simple. Is most of the upside already in the price, or is the rerating only getting started?
Preferred P/E of 29x: Is it justified?
Teledyne Technologies changes hands at a P/E of 29x, which puts a clear price on every dollar of its earnings today relative to other electronic hardware peers.
The P/E ratio compares the current share price with the last twelve months of net profit, so it tells you how much investors are willing to pay for each dollar of earnings. For a business like Teledyne Technologies, spread across digital imaging, instrumentation, aerospace and engineered systems, that single figure effectively rolls together expectations around contract wins, product launches and future profitability into one number.
On an absolute basis, a 29x P/E leaves the stock trading above the estimated fair P/E of 24.4x. This points to a richer tag than that regression based level the market could move toward over time. In practice, that gap means buyers are currently accepting a higher multiple than this fair ratio suggests, even though earnings are forecast to rise 8.1% per year and return on equity is described as low at 8.9%.
Compared with the broader US Electronic industry average P/E of 30x, the multiple on Teledyne Technologies is slightly lower, so the ticker trades at a modest discount to sector pricing even as it screens as expensive against the 24.4x fair ratio. Relative to the peer group average of 45.9x, the P/E looks materially cheaper, which indicates the market is valuing Teledyne Technologies' earnings well below many directly comparable industrial technology stocks.
Explore the SWS fair ratio for Teledyne Technologies.
Result: Price-to-earnings of 29x (ABOUT RIGHT)
Still, Teledyne Technologies leans heavily on government and defense spending. Any pause in contract awards or regulatory shifts could quickly cool that rerating story.
Find out about the key risks to this Teledyne Technologies narrative.
Another view on Teledyne Technologies' value
The SWS DCF model points in a different direction. On this measure, Teledyne Technologies at $609.08 trades slightly above an estimated future cash flow value of $600.36, so the shares screen as modestly overvalued. If earnings delivery slips, does that small premium still feel comfortable?
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Teledyne Technologies for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 30 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
Mixed signals or early stage rerating: you do not have long to decide how Teledyne Technologies fits your plan, so stress test both sides of the story and weigh the 4 key rewards and 1 important warning sign
Looking for more Teledyne Technologies sized ideas?
If Teledyne Technologies has caught your attention, do not stop here. Broader idea hunting with solid filters can sharpen your watchlist and your decisions.
- Target resilient companies with strong finances by scanning a curated list of solid balance sheet and fundamentals (23 results) list that keeps weaker balance sheets off your radar.
- Hunt for quality at a discount by reviewing the 30 high quality undervalued stocks collection that combines solid fundamentals with more restrained pricing.
- Lock in potential income streams by focusing on the 7 dividend fortresses group that emphasises higher yields and sturdier payouts.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com