Stock Analysis on Net

Teradyne Inc. (NASDAQ:TER)

This company has been moved to the archive! The financial data has not been updated since May 3, 2024.

Present Value of Free Cash Flow to Equity (FCFE) 

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Intrinsic Stock Value (Valuation Summary)

Teradyne Inc., free cash flow to equity (FCFE) forecast

US$ in thousands, except per share data

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Year Value FCFEt or Terminal value (TVt) Calculation Present value at 18.91%
01 FCFE0 375,325
1 FCFE1 477,336 = 375,325 × (1 + 27.18%) 401,420
2 FCFE2 594,431 = 477,336 × (1 + 24.53%) 420,388
3 FCFE3 724,505 = 594,431 × (1 + 21.88%) 430,889
4 FCFE4 863,852 = 724,505 × (1 + 19.23%) 432,054
5 FCFE5 1,007,119 = 863,852 × (1 + 16.58%) 423,598
5 Terminal value (TV5) 50,452,171 = 1,007,119 × (1 + 16.58%) ÷ (18.91%16.58%) 21,220,368
Intrinsic value of Teradyne Inc. common stock 23,328,717
 
Intrinsic value of Teradyne Inc. common stock (per share) $149.44
Current share price $120.44

Based on: 10-K (reporting date: 2023-12-31).

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.


Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.68%
Expected rate of return on market portfolio2 E(RM) 13.78%
Systematic risk of Teradyne Inc. common stock βTER 1.56
 
Required rate of return on Teradyne Inc. common stock3 rTER 18.91%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rTER = RF + βTER [E(RM) – RF]
= 4.68% + 1.56 [13.78%4.68%]
= 18.91%


FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Teradyne Inc., PRAT model

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Average Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in thousands)
Cash dividends 67,927 69,763 66,034 66,540 61,355
Net income 448,752 715,501 1,014,589 784,147 467,468
Revenues 2,676,298 3,155,045 3,702,881 3,121,469 2,294,965
Total assets 3,486,824 3,501,252 3,809,425 3,652,346 2,787,014
Shareholders’ equity 2,525,897 2,451,294 2,562,444 2,207,018 1,480,158
Financial Ratios
Retention rate1 0.85 0.90 0.93 0.92 0.87
Profit margin2 16.77% 22.68% 27.40% 25.12% 20.37%
Asset turnover3 0.77 0.90 0.97 0.85 0.82
Financial leverage4 1.38 1.43 1.49 1.65 1.88
Averages
Retention rate 0.89
Profit margin 22.47%
Asset turnover 0.86
Financial leverage 1.57
 
FCFE growth rate (g)5 27.18%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

1 Retention rate = (Net income – Cash dividends) ÷ Net income
= (448,75267,927) ÷ 448,752
= 0.85

2 Profit margin = 100 × Net income ÷ Revenues
= 100 × 448,752 ÷ 2,676,298
= 16.77%

3 Asset turnover = Revenues ÷ Total assets
= 2,676,298 ÷ 3,486,824
= 0.77

4 Financial leverage = Total assets ÷ Shareholders’ equity
= 3,486,824 ÷ 2,525,897
= 1.38

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.89 × 22.47% × 0.86 × 1.57
= 27.18%


FCFE growth rate (g) implied by single-stage model

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (18,802,115 × 18.91%375,325) ÷ (18,802,115 + 375,325)
= 16.58%

where:
Equity market value0 = current market value of Teradyne Inc. common stock (US$ in thousands)
FCFE0 = the last year Teradyne Inc. free cash flow to equity (US$ in thousands)
r = required rate of return on Teradyne Inc. common stock


FCFE growth rate (g) forecast

Teradyne Inc., H-model

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Year Value gt
1 g1 27.18%
2 g2 24.53%
3 g3 21.88%
4 g4 19.23%
5 and thereafter g5 16.58%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= 27.18% + (16.58%27.18%) × (2 – 1) ÷ (5 – 1)
= 24.53%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 27.18% + (16.58%27.18%) × (3 – 1) ÷ (5 – 1)
= 21.88%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 27.18% + (16.58%27.18%) × (4 – 1) ÷ (5 – 1)
= 19.23%