Teradyne, Inc. TER
Verdict: Strong sell. Fair value $124 against a price of $229 on 6 Jan 2026, 46% below the price.
In plain words
The case for: Narrow competitive moat provides durability. Market leadership enables pricing power. Industry tailwinds with growing market.
The case against: Intense competitive pressure could compress margins.
Main risks
- Significant Revenue & Profit Decline: Revenue and Net Income are down 23% and 47% respectively from 2021 peaks, highlighting severe cyclicality and sensitivity to industry downturns.
- Negative 3-Year Growth: The 3-year compound annual revenue growth rate is -8.6%, indicating a period of business contraction that the recent modest recovery has not yet reversed.
- Poor Incremental Returns (Negative ROIIC): Estimated 3-year ROIIC is highly negative (-41.4%), suggesting capital reinvested during the downturn has failed to generate incremental profit, a major red flag for capital allocation effectiveness.
- Intense competitive environment
- Valuation prices in optimistic scenario (limited margin for error)