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Teradyne, Inc. (TER) Intrinsic Value

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

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Teradyne, Inc. (TER)

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Intrinsic Value (DCF)

Current$227.70
→
Intrinsic$55.63
-76%
$38.99$55.63$87.27
Current price reflects execution expectations above 8% growth — not unreasonable for quality businesses.
Range: Bear $39 → Bull $87. Current price implies expectations above the base case, closer to bull expectations.
Current price reflects assumptions at the upper end of our valuation range (bull case: $87).
Discount ↓Growth →4%6%8%10%
8%$65$71$77$84
10%$47$51$56$60
12%$38$40$44$47
14%$31$34$36$39

Bull Case

  • Bull case ($87) with 10% growth, 9% discount rate
  • Conservative 8% growth assumption is achievable based on track record

Bear Case

  • Bear case ($39) implies 83% downside at 6% growth, 12% discount
  • Trading 76% above base case — execution must exceed assumptions to justify
  • Price exceeds bull case ($87) — requires exceptional execution
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5-Year Free Cash Flow Projection

Year 1$512.01M
Year 2$552.97M
Year 3$597.21M
Year 4$644.98M
Year 5$696.58M
Terminal$10.25B

📐 Model Inputs

Growth Rate8.0%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$474.08MTTM 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 TER stock undervalued or overvalued?
🔴 OVERVALUED

TER trades at $227.70 vs. our DCF-derived intrinsic value of $55.63, implying -76% downside. Using a 10.0% WACC and 8.0% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($75.06) suggests limited upside.

What is TER's intrinsic value?

Using a 5-year DCF model: Base FCF of $474M, projected at 8.0% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $-477M net debt and dividing by 0.16B shares: Bear $41.10 | Base $55.63 | Bull $75.06. Current price $227.70 implies -76% to base case.

How is TER's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 8.0% 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=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($8.61B).

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: 18.2x.