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TE Connectivity Ltd. (TEL) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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TE Connectivity Ltd. (TEL)

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Intrinsic Value (DCF)

Current$241.92
→
Intrinsic$292.79
+21%
$191.19$292.79$494.87
Market implies 13% growth for 5 years
TEL shows 21% potential upside using 17% growth — reasonable if fundamentals hold.
At $242, the market prices in 13% annual cash flow growth — a moderate expectation aligned with historical trends (17%).
Range: Bear $191 → Bull $495. Current price implies expectations below the base case, but well above the bear case.
Discount ↓Growth →13%15%17%19%
8%$370$402$438$475
10%$248$269$293$318
12%$183$199$216$235
14%$144$156$169$184

Bull Case

  • Bull case ($495) offers 105% upside at 21% growth, 8% discount
  • 17% margin of safety vs. base case estimate
  • Market-implied growth (13%) ≤ historical CAGR (17%)

Bear Case

  • Bear case ($191) implies 21% downside at 14% growth, 12% discount
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5-Year Free Cash Flow Projection

Year 1$3.76B
Year 2$4.42B
Year 3$5.19B
Year 4$6.10B
Year 5$7.16B
Terminal$113.53B

📐 Model Inputs

Growth Rate17.5%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate9.5%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$3.20BTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is TEL stock undervalued or overvalued?
🟢 UNDERVALUED

TEL trades at $241.92 vs. our DCF-derived intrinsic value of $292.79, implying +27% upside. At a 9.5% WACC and 17.5% projected FCF growth, the market appears to be underpricing the present value of TEL's future cash flows. The bear case ($187.26) still suggests upside, providing margin of safety.

What is TEL's intrinsic value?

Using a 5-year DCF model: Base FCF of $3.20B, projected at 17.5% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 9.5% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $4.44B net debt and dividing by 0.30B shares: Bear $187.26 | Base $292.79 | Bull $450.33. Current price $241.92 implies +27% to base case.

How is TEL's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 17.5% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=9.5%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($91.98B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 28.7x.