KEYSIGHT TECHNOLOGIES, INC. (KEYS): what the price assumes

In the published model solve dated 2026-Q2, anchored at $319.97, KEYSIGHT TECHNOLOGIES, INC. (KEYS) is priced for today's economics sustained for ~12.4 years. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-06-27.

Generated: 2026-08-31 · Source: https://boothcheck.com/report/KEYS

Headline

FieldValue
TickerKEYS
CompanyKEYSIGHT TECHNOLOGIES, INC.
Current price$319.97/sh
CompositionAerospace, Defense & Government 23% / Commercial Communications 46% / Electronic Industrial 31%

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin (value-band context)38.1%
Operating margin today18.2%
Margin expansion (value-band)+19.9pp
Must persist for12.4y
Multiple paid50x operating income

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 10.5% cost of capital; growth searched up to the 25% self-funding ceiling.

How unusual the bet is: elevated (limited comparison data)

ReferenceValue
vs own history+1.28σ
cohort percentile (of 188 peers)84

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset4.49x5expensive
Earnings4.83x5expensive
Relative2.88x2expensive
Growth1.01x3expensive

Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.7%); the inversion above states its own rate.

Per-Model Detail (n=15)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$272.321.17xyesFCF base $1.6B, growth 19% (input: historical growth), terminal g 4.0%, WACC 8.7%, 6yr projection
DCF Exit MultipleGrowth$346.620.92xyesExit EV/EBITDA: 46.7x / 48.7x / 50.7x (bear / base = today's held flat / bull), 6yr
Relative ValuationRelative——noP/E 28.16x (blended: static sector reference 18x + trailing (TTM) 52x), scenarios: 22.9x / 28.2x / 33.4x (bear / base = reference held flat / bull), EV/EBITDA 23.01x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$66.684.80xyesBV/sh $37.05, ROE (TTM) 16.6%, ke 9.3%
Two-Stage Excess ReturnAsset$88.293.62xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$316.001.01xyesRev $6.1B, growth 19% (input: historical growth; tapered), Terminal P/S: 7.3x / 9.0x / 10.7x (bear / base = today's held flat / bull, cap 12x)
Peter Lynch Fair ValueRelative$73.204.37xyesEPS $6.10, growth 1% (input: historical EPS growth), PEG=43.02 (Overvalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$51.856.17xyesNormalized EBIT (5y avg op income, one-time charges added back) $1.14B × (1−17%) / WACC 8.7% → EPV (no growth)
Residual IncomeAsset$89.163.59xyesBV $37.05 + 5yr PV of (ROE (TTM) 16.6% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham NumberAsset$71.314.49xyes√(22.5 × EPS $6.10 × BVPS $37.05) — Graham's conservative floor
EV/EBITDA RelativeRelative——noEBITDA $1.14B × sector EV/EBITDA 12.0x
FCF YieldEarnings$79.724.01xyesFCF $1357.0M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$66.314.83xyesSBC-adj FCF $1.15B (FCF $1.36B − SBC $0.21B) capitalized at Kₑ
Ben Graham FormulaEarnings$196.831.63xyesEPS $6.10 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset$19.5316.38xyesBV $37.05 × (ROIC 4.6% / WACC 8.7%)
P/Sales SectorRelative——noRevenue $6.09B × sector P/S 2.5x
PEG Fair ValueRelative$228.751.40xyesEPS $6.10 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings YieldEarnings$65.954.85xyesEPS $6.10 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

UnitRoleValuation basisRevenueReported profitValue evidenceStatus
Communications Solutions Group (CSG)operatingenterprise$3.7b—withheldunresolved no unit value
Electronic Industrial Solutions Group (EISG)operatingenterprise$1.6b—withheldunresolved no unit value

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

FieldValue
Net debt$119.0m
Net debt / NOPAT (after-tax)0.13x
Net debt / operating income (pre-tax)0.11x
Interest coverage10.1x
Share count CAGR (buyback)-1.4%
Burning cashno

Bullet Takeaways

Bull Case

What the standard valuation models miss about Keysight is the nature of its position in the electronics economy. It is not a hardware vendor selling boxes; it is the company whose instruments and software define how new technology gets measured and validated. When engineers design the next generation of wireless, automotive electronics, or defense systems, they need Keysight's equipment to know whether it works, and the company's filing frames the demand backdrop precisely: its customers are pursuing "new levels of connectivity, utility, and automation" and "embracing new communications technology and working to incorporate the latest electronics". Every wave of new electronics standards creates a wave of test demand, and Keysight's installed base and software make it the default choice each cycle.

The recent results show that position compounding faster than its mature-company label suggests. Second-quarter revenue grew 31% to $1.72 billion, non-GAAP EPS surged to $2.87 against a $2.32 estimate, and orders surpassed $2 billion, up 56% year over year, with core order growth of 48% on top of acquisition contribution. Free cash flow hit a record $472 million. Orders running well ahead of revenue is the leading indicator that matters for a capital-equipment company, and a 56% order jump signals the demand cycle is accelerating, not fading.

Management is also using its strong balance sheet to deepen the moat through acquisition. Keysight closed the $1.56 billion purchase of Spirent in network testing, the $580 million Synopsys Optical Solutions Group, and the $102 million Ansys PowerArtist business, together adding roughly $375 million of fiscal 2026 revenue and extending its reach into network emulation, optical, and power-integrity design. With net debt of just $119 million against $1.1 billion of trailing operating income, essentially an unlevered balance sheet, Keysight can fund this expansion internally. A company that owns the measurement layer of the electronics industry, sees orders accelerating, and can buy adjacent capabilities with its own cash is the kind of durable compounder the static methods structurally underprice.

Bear Case

The valuation methods disagree sharply, and the disagreement is the bear case. Only the growth-based method reaches today's price; the asset-value, earnings-power, and peer-multiple methods all read the stock as richly valued, several at four to five times what they would justify. When the conservative methods, the ones that value a business on what it owns and what it earns today, all sit far below the price, and only the method that extrapolates years of growth bridges the gap, the more honest reading is that the price has run ahead of the demonstrated economics. The price embeds an exceptionally long runway, roughly fourteen years of sustained above-average compounding, and that kind of durability sits in the most demanding tier of what comparable companies have historically delivered.

The underlying business is also more cyclical than its premium multiple implies. Keysight's filing is explicit that it depends "to a large degree, on customers whose industries are subject to seasonal or cyclical trends", singling out the consumer electronics market as "particularly volatile, making demand difficult to anticipate". The 56% order surge is a cycle accelerating, but test-and-measurement demand swings with customer research and capital budgets, which contract in downturns. The same filing warns that in a downturn, excess manufacturing capacity would leave the company carrying fixed costs against lower production. A premium-priced stock at what may be a cyclical high in orders is exposed if the next leg of the electronics cycle turns down.

The acquisition strategy adds a second layer of risk to the premium. Keysight has just absorbed three businesses in quick succession, and the gap between its trailing operating margin near 18% and the much higher margins the bull case assumes reflects integration and acquisition costs that have to be worked through before the combined company earns at the rate the price requires. Bolt-on M&A at scale carries integration risk, and a valuation this stretched leaves no room for an acquisition to disappoint or for the order cycle to cool. The bet at this price is that Keysight compounds at an elite rate for well over a decade, through cycles, while digesting its deals cleanly. The conservative methods are pricing the risk that any one of those assumptions slips.

Valuation

The price is a durability bet of unusual length, and the methods make that explicit. Only the forward-growth method reaches the price; the asset-value, earnings-power, and peer-multiple families all read it as expensive, several at four to five times their own estimates. That pattern says the entire premium rests on Keysight sustaining above-average growth far longer than the static methods can credit, and the implied runway is roughly fourteen years, a duration in the most demanding tier of what comparable companies have achieved.

The spread between the methods is the information, and here it is wide. The gap between today's trailing operating margin near 18% and the much higher margin the price implies partly reflects acquisition and integration costs depressing current reported profit, so the business earns more than the trailing figure suggests on a normalized basis. But even crediting that, the price asks for elite, sustained compounding. A reader should treat this not as a mispricing to bet against reflexively, since genuinely advantaged compounders do earn these multiples, but as a high bar: the price already assumes Keysight executes near the top of the range, which leaves little cushion if growth merely meets, rather than exceeds, expectations.

Solvency is a clear strength and not a concern. Net debt of just $119 million against $1.1 billion of trailing operating income is essentially an unlevered balance sheet, with interest coverage above ten times and record free cash flow funding both the buyback and the acquisition program. The genuine risk in the valuation is not the balance sheet; it is duration and cyclicality. The price requires a long stretch of elite compounding from a business whose demand swings with its customers' cycles, so the bet is on both the height and the length of the growth, with little room for the order cycle to cool or the acquisitions to underdeliver.

Catalysts

The second quarter was a standout. Keysight reported revenue up 31% year over year to $1.72 billion and non-GAAP EPS of $2.87, beating the $2.32 consensus by nearly 24%, with orders surpassing $2 billion, up 56%, and record free cash flow of $472 million. Core order growth was 48%, with acquisitions adding about 700 basis points, so the demand strength is largely organic.

Management raised its full-year fiscal 2026 revenue growth outlook to the high-20s percent range and guided third-quarter non-GAAP EPS to $2.43 to $2.49, above expectations. The portfolio also expanded materially: Keysight completed the $1.56 billion Spirent acquisition in network testing, the $580 million Synopsys Optical Solutions Group, and the $102 million Ansys PowerArtist business, which together add roughly $375 million of fiscal 2026 revenue. The catalysts to track are the order trajectory as the leading indicator of the demand cycle, the integration and margin contribution of the three acquisitions, and end-market spending in communications, aerospace and defense, and electronic industrial.

Peer Cohorts (Per Segment, With Filing Citations)

Communications Solutions Group (CSG) (reported)

Electronic Industrial Solutions Group (EISG) (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Q2 FY2026 earnings release · Q2 FY2026 results · Q2 FY2026 earnings call · Q2 FY2026 guidance

View the full interactive KEYS report on boothcheck