DCF Studio

    TDY · NYQ · Technology

    Teledyne Technologies Incorporated

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 200.49

    Market price

    USD 603.46

    Implied upside

    -66.8%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedReported capital expenditure averages 1.78% of revenue against depreciation and amortisation of 5.67%. A business cannot depreciate more than it invests indefinitely. Capex has been set to 5.67% of revenue so the forecast is not handed free growth. The accounts do not separate depreciation from amortisation, so the combined charge is used - if a large part of it is amortisation of an acquisition, the reported capex is probably right and this substitution is not. Override it if the reported figure is right.

    Current EV/EBITDA of 20.4x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 200.49-66.8%
    Exit multiple
    USD 520.07-13.8%
    Market price
    USD 603.46

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m476m951mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 6.4bnUSD 6.6bnUSD 6.9bnUSD 7.1bnUSD 7.4bn+3.9%
    EBITUSD 1.2bnUSD 1.2bnUSD 1.3bnUSD 1.3bnUSD 1.4bn+3.9%
    NOPATUSD 1.0bnUSD 1.1bnUSD 1.1bnUSD 1.1bnUSD 1.2bn+3.9%
    Add depreciation & amortisationUSD 359.9mUSD 373.8mUSD 388.2mUSD 403.2mUSD 418.8m+3.9%
    Less capital expenditureUSD -359.9mUSD -373.8mUSD -388.2mUSD -403.2mUSD -418.8m+3.9%
    Less increase in working capitalUSD -197.7mUSD -205.4mUSD -213.3mUSD -221.5mUSD -230.1m+3.9%
    Free cashflow to firmUSD 817.6mUSD 849.2mUSD 882.0mUSD 916.0mUSD 951.4m+3.9%
    Discount factor0.95490.87080.79410.72420.6604-
    Present valueUSD 780.8mUSD 739.5mUSD 700.4mUSD 663.4mUSD 628.3m-5.3%
    Present Value Of The ForecastUSD 3.5bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.938Reported 0.908, pulled toward 1.0 (Blume)
    Cost of equity10.16%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 28.0bn91.4% of capital
    Total debtUSD 2.6bn8.6% of capital, book value as a proxy
    Tax rate12.8%Effective, capped at statutory
    WACC9.66%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 200.49

    70% of EV

    Forecast FCFF, final year
    USD 951.4m
    Capex at depreciation, working capital in reinvestment
    USD 1.2bn
    Less reinvestment at g/ROIC (25.9% of NOPAT)
    USD -305.8m
    Capitalised
    USD 875.6m
    ROIC (WACC floor)
    9.7%
    Terminal value, undiscounted
    USD 12.5bn
    Terminal value, discounted
    USD 8.3bn
    Enterprise value
    USD 11.8bn
    Less net debt
    USD 2.3bn
    Equity value
    USD 9.5bn

    Exit at 20.0x EBITDA

    Value per shareUSD 520.07

    87% of EV

    Terminal value, undiscounted
    USD 35.5bn
    Terminal value, discounted
    USD 23.4bn
    Enterprise value
    USD 26.9bn
    Less net debt
    USD 2.3bn
    Equity value
    USD 24.7bn

    Spread between methods: 89%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    7.66%266.16267.33268.49269.66270.83
    8.66%228.53229.52230.51231.50232.49
    9.66%198.78199.63200.49201.34202.19
    10.66%174.69175.43176.17176.92177.66
    11.66%154.80155.45156.10156.75157.40

    Outlined: this model. Green text: above today's price of 603.46. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year3.9%39.6%+35.7pp
    EBIT margin18.3%46.0%+27.7pp
    Discount rate9.7%4.9%-4.8pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.