TEL
TE Connectivity plc
$202.06
Cyclical & Capital-Intensive
70%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 52.6% above fair value
You pay
$202.06
Bear
$92.69
Fair
$132.44
Bull
$172.18
Bear
$92.69
-54.1%
$6.79 × 12x + net cash
Fair
$132.44
-34.5%
$6.79 × 16x + net cash
Bull
$172.18
-14.8%
$6.79 × 20x + net cash
Key Value Driver
Through-cycle normalized EPS ($6.79)
Implied Market Multiple
29.8x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $258.25 from 29 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $132.44 per share.
Warnings
Price-to-book value of 18.2x is above the normal range for this type of business (0.7x-2.0x). The stock may already price in a strong cycle.
Wall Street's average price target is $258.25 (from 29 analysts). Our estimate is 65% below the consensus -- consider that gap carefully.
Key Risks
- Standard 10-year DCF produces unreliable terminal values for cyclicals
- 'Cheap' P/E at cycle peak is the most common value trap — normalize first
- Captive finance subsidiaries have different risk profiles from manufacturing