DCF Studio

    TER · NMS · Technology

    Teradyne, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 31.32

    Market price

    USD 371.47

    Implied upside

    -91.6%

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

    Wrong toolThis model values the shares at 8.4% of the market price. A gap that size is a modelling failure rather than a view - most often an unusable beta, a currency or units mismatch, or a cashflow base that does not represent the business. Read the figures below as diagnostics, not as a call.
    AdjustedCapital expenditure runs at 6.3% of revenue against depreciation of 4.0%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Current EV/EBITDA of 71.1x 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 31.32-91.6%
    Exit multiple
    USD 72.70-80.4%
    Market price
    USD 371.47

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m271m541mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 3.2bnUSD 3.2bnUSD 3.2bnUSD 3.2bnUSD 3.2bn+0.4%
    EBITUSD 701.2mUSD 703.8mUSD 706.4mUSD 709.0mUSD 711.6m+0.4%
    NOPATUSD 607.4mUSD 609.6mUSD 611.9mUSD 614.1mUSD 616.4m+0.4%
    Add depreciation & amortisationUSD 127.3mUSD 127.8mUSD 128.3mUSD 128.8mUSD 129.2m+0.4%
    Less capital expenditureUSD -201.6mUSD -202.3mUSD -203.1mUSD -203.8mUSD -204.6m+0.4%
    Less increase in working capitalUSD 101.7kUSD 102.1kUSD 102.5kUSD 102.8kUSD 103.2k-0.4%
    Free cashflow to firmUSD 533.2mUSD 535.2mUSD 537.2mUSD 539.1mUSD 541.1m+0.4%
    Discount factor0.93940.82900.73150.64550.5696-
    Present valueUSD 500.9mUSD 443.7mUSD 392.9mUSD 348.0mUSD 308.3m-11.4%
    Present Value Of The ForecastUSD 2.0bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.521Reported 1.778, pulled toward 1.0 (Blume)
    Cost of equity13.36%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 58.1bn99.5% of capital
    Total debtUSD 283.2m0.5% of capital, book value as a proxy
    Tax rate13.4%Effective, capped at statutory
    WACC13.32%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 31.32

    60% of EV

    Forecast FCFF, final year
    USD 541.1m
    Capex at depreciation, working capital in reinvestment
    USD 634.1m
    Less reinvestment at g/ROIC (13.2% of NOPAT)
    USD -83.8m
    Capitalised
    USD 550.3m
    ROIC (reported)
    18.9%
    Terminal value, undiscounted
    USD 5.2bn
    Terminal value, discounted
    USD 3.0bn
    Enterprise value
    USD 5.0bn
    Less net debt
    USD -38.8m
    Equity value
    USD 5.0bn

    Exit at 20.0x EBITDA

    Value per shareUSD 72.70

    83% of EV

    Terminal value, undiscounted
    USD 16.8bn
    Terminal value, discounted
    USD 9.6bn
    Enterprise value
    USD 11.6bn
    Less net debt
    USD -38.8m
    Equity value
    USD 11.6bn

    Spread between methods: 80%.

    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%
    11.32%36.5637.2237.9538.7639.67
    12.32%33.3033.7834.3034.8635.48
    13.32%30.6030.9531.3231.7132.15
    14.32%28.3328.5728.8429.1229.43
    15.32%26.3826.5626.7526.9527.16

    Outlined: this model. Green text: above today's price of 371.47. 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 year0.4%74.2%+73.8pp
    Discount rate13.3%3.4%-10.0pp
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    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

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