Teradyne, Inc. (NASDAQ:TER), which is in the semiconductor business, and is based in United States, led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Today I will analyse the most recent data on Teradyne’s outlook and valuation to see if the opportunity still exists.
What is Teradyne worth?According to my valuation model, the stock is currently overvalued by about 35.48%, trading at US$38.75 compared to my intrinsic value of $28.6. This means that the buying opportunity has probably disappeared for now. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Teradyne’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Teradyne generate?Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of Teradyne, it is expected to deliver a relatively unexciting earnings growth of 5.5%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in TER’s future outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe TER should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on TER for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Teradyne. You can find everything you need to know about Teradyne in the latest infographic research report. If you are no longer interested in Teradyne, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.