TE Connectivity (TEL) shares are in focus after the company and Credo Technology Group reached a confidential license and settlement agreement over AEC technology, with all related lawsuits set to be dismissed.
See our latest analysis for TE Connectivity.
The legal settlement arrives after a soft patch in momentum, with the share price at US$210.98, a 30 day share price return of 2.49% but a 90 day share price return of an 8.11% decline, while the 1 year total shareholder return of 74.97% and 3 year total shareholder return of 76.31% point to stronger longer term gains.
If this legal resolution has you thinking beyond a single name, it could be a good moment to widen your search with our 28 power grid technology and infrastructure stocks
With TE Connectivity now free from this legal overhang and trading at US$210.98, the key question for you is simple: is the current price already reflecting future growth, or could there still be an opportunity for investors at this level?
Most Popular Narrative: 22.4% Undervalued
At a last close of $210.98 versus a narrative fair value of $272.00, the widely followed view frames TE Connectivity as materially undervalued based on long term cash flow potential and profitability assumptions.
Broad based order growth, especially in Industrial and Energy markets, coupled with positive early signs of recovery in factory automation, creates a durable foundation for double digit EPS growth and high free cash flow conversion (>100%), further strengthening the company's capacity to invest in secular tailwinds or execute value accretive acquisitions.
Curious what earnings path and margin profile support that higher fair value. The narrative leans on firm revenue expansion, rising profitability and a richer future earnings multiple.
Result: Fair Value of $272.00 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, the narrative could be challenged if demand in AI, energy or Asian transportation weakens, or if acquisition integration issues and shifting regulations pressure margins and cash flows.
Find out about the key risks to this TE Connectivity narrative.
Another View on TEL's Value
While the narrative fair value sits at $272.00, the SWS DCF model points in the other direction, with an estimate of $172.94 that suggests the current $210.98 price is above its implied future cash flow value. Which story do you think better fits your expectations for TE Connectivity?
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out TE Connectivity for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 61 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
With such a mixed picture on value and sentiment, it makes sense to review the numbers yourself and move quickly to shape your own stance on TEL. You can start with its 3 key rewards and 1 important warning sign.
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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.
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