TDY Teledyne Technologies
Niche engineered-products firm priced as a franchise—discipline says no.
The story
Teledyne is a diversified engineered-products conglomerate spanning defense electronics, industrial sensors, and scientific imaging. Its moat is modest—specialized niche positioning rather than dominant market share—and growth has been tepid (~4% CAGR) with margins stuck near 18-19% despite years of M&A. At 28x revenue-equivalent pricing, the market is pricing a franchise-quality story that the financials simply do not support.
Keeping all prior drivers unchanged: TTM revenue growth of ~4% and margins of 19.5% confirm the previous 5% growth and 22% target margin are already generous. Sales-to-capital of 0.55 is slightly above the TTM 0.49, giving Teledyne benefit of the doubt. No facts have changed to warrant driver moves; the gap is the market's, not mine.
Value drivers
| Revenue growth (Y1) | 5.0% |
| Terminal growth | 3.0% |
| Forecast horizon | 8y |
| Target operating margin | 22.0% |
| Years to target margin | 8 |
| Sales-to-capital | 0.55 |
| Beta | 1.15 |
| Failure probability | 1.0% |
| Cost of capital (WACC) | 9.6% |
| Terminal WACC | 9.0% |
Valuation bridge
| PV of explicit FCFF | 4.09B |
| PV of terminal value | 8.70B |
| Equity value | 10.55B |
| ÷ shares → per share | $227.68 |
News
neutral +0.15 · 8 articles
- Teledyne (TDY) Stock Could Be 10% Undervalued After Thermal Imaging Win
- What’s Going On With Teledyne Technologies (TDY)?
- Teledyne Technologies (TDY) Lands Defense Orders And Expands Its Role In Military Sensors
- Axon's Connected Devices Unit Fuels Growth: Can It Sustain the Momentum?
- Can Commercial Aerospace Recovery Boost Teledyne's Growth?
- KTOS Stock Falls 37% YTD: Can New Defense Awards Spark a Rebound?
- Everspin and Teledyne HiRel Partner to Offer MRAM for Aerospace and Defense Applications
- A Rocket Launch Just Highlighted Teledyne’s (TDY) Overlooked Space Business
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 6.69B | 5.0% | 19.8% | 1.09B | 579.49M | 506.47M | 462.23M |
| 2 | 7.01B | 4.7% | 20.1% | 1.15B | 573.70M | 581.27M | 484.15M |
| 3 | 7.32B | 4.4% | 20.4% | 1.22B | 564.33M | 660.38M | 502.00M |
| 4 | 7.62B | 4.1% | 20.8% | 1.29B | 551.30M | 743.52M | 515.83M |
| 5 | 7.92B | 3.9% | 21.1% | 1.36B | 534.55M | 830.34M | 525.74M |
| 6 | 8.20B | 3.6% | 21.4% | 1.43B | 514.04M | 920.43M | 531.87M |
| 7 | 8.47B | 3.3% | 21.7% | 1.50B | 489.81M | 1.01B | 534.39M |
| 8 | 8.72B | 3.0% | 22.0% | 1.57B | 461.91M | 1.11B | 533.51M |
Key risks
- Defense budget cuts or program delays affecting sensor/electronics segments
- M&A integration risk—Teledyne's growth model depends on acquisitions that may get harder at scale
- Margin compression from competitive pressure in commoditized industrial imaging
Catalysts
- Defense spending acceleration boosting sensor and electronics orders
- Successful large acquisition expanding addressable market
- Margin expansion from portfolio rationalization and operational leverage