Is There Now An Opportunity In TE Connectivity Ltd. (NYSE:TEL)?

Let's talk about the popular TE Connectivity Ltd. (NYSE:TEL). The company's shares had a relatively subdued couple of weeks in terms of changes in share price, which continued to float around the range of US$139 to US$152. However, is this the true valuation level of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at TE Connectivity’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for TE Connectivity

What's The Opportunity In TE Connectivity?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 1.1% below our intrinsic value, which means if you buy TE Connectivity today, you’d be paying a reasonable price for it. And if you believe the company’s true value is $153.40, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because TE Connectivity’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from TE Connectivity?

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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for TE Connectivity, at least in the near future.

What This Means For You

Are you a shareholder? Currently, TEL appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on TEL for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on TEL should the price fluctuate below its true value.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - TE Connectivity has 1 warning sign we think you should be aware of.

If you are no longer interested in TE Connectivity, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.