TE CONNECTIVITY PLC (TEL): what the price requires
At today's price, TE CONNECTIVITY PLC (TEL) is priced for +18.0% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/TEL
Headline
| Field | Value |
|---|---|
| Ticker | TEL |
| Company | TE CONNECTIVITY PLC |
| Sector / Industry | Industrials |
| Current price | $198.29/sh |
| Composition | Automotive 41% / Commercial transportation 8% / Sensors 5% / Digital data networks 13% / Automation and connected living 12% / Aerospace, defense, and marine 9% / Energy 8% / Medical 4% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 17.1% |
| Operating margin today | 19.5% |
| Margin compression implied | -2.4pp |
| Implied growth | 18.0% |
| Multiple paid | 18x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 10% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~6.6pp.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | +0.27σ |
| cohort percentile (of 225 peers) | 33 |
| sustained it ~5 years at this level | 40% |
| implied end-window share | 0% |
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.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.86x | 5 | expensive |
| Earnings | 1.82x | 5 | expensive |
| Relative | 1.25x | 5 | expensive |
| Growth | 0.56x | 3 | justifies |
Families that justify the price: Growth Families that call it expensive: Asset, Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.5%); the inversion above states its own rate.
Per-Model Detail (n=18)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $542.76 | 0.37x | yes | FCF base $4.4B, growth 17% (input: historical growth), terminal g 4.0%, WACC 8.5%, 6yr projection |
| DCF Exit Multiple | Growth | $352.73 | 0.56x | yes | Exit EV/EBITDA: 13.2x / 15.2x / 17.2x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $179.90 | 1.10x | yes | P/E 18x (static sector reference · 2026-04), scenarios: 14.8x / 18.0x / 21.2x (bear / base = reference held flat / bull), EV/EBITDA 12x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $106.50 | 1.86x | yes | BV/sh $44.86, ROE (TTM) 22.0%, ke 9.3% |
| Two-Stage Excess Return | Asset | $163.15 | 1.22x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $239.79 | 0.83x | yes | Rev $18.7B, growth 17% (input: historical growth; tapered), Terminal P/S: 2.6x / 3.1x / 3.7x (bear / base = today's held flat / bull, cap 12x) |
| Peter Lynch Fair Value | Relative | $117.60 | 1.69x | yes | EPS $9.80, growth 2% (input: historical EPS growth), PEG=10.06 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $110.98 | 1.79x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $3.03B × (1−9%) / WACC 8.5% → EPV (no growth) |
| Residual Income | Asset | $153.26 | 1.29x | yes | BV $44.86 + 5yr PV of (ROE (TTM) 22.0% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $99.46 | 1.99x | yes | √(22.5 × EPS $9.80 × BVPS $44.86) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $152.80 | 1.30x | yes | EBITDA $4.13B × sector EV/EBITDA 12.0x |
| FCF Yield | Earnings | $108.86 | 1.82x | yes | FCF $3391.0M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $102.56 | 1.93x | yes | SBC-adj FCF $3.22B (FCF $3.39B − SBC $0.17B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $316.21 | 0.63x | yes | EPS $9.80 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $25.77 | 7.69x | yes | BV $44.86 × (ROIC 4.9% / WACC 8.5%) |
| P/Sales Sector | Relative | $158.44 | 1.25x | yes | Revenue $18.70B × sector P/S 2.5x |
| PEG Fair Value | Relative | $367.50 | 0.54x | yes | EPS $9.80 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $105.95 | 1.87x | yes | EPS $9.80 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $4.5b |
| Net debt / NOPAT (after-tax) | 1.42x |
| Net debt / operating income (pre-tax) | 1.29x |
| Interest coverage | 33.9x |
| Share count CAGR (buyback) | -2.5% |
| Burning cash | no |
Bullet Takeaways
- TE Connectivity makes the connectors and sensors that carry power and data inside cars, factories, and data centers, and the mix is shifting toward two secular tailwinds at once: automotive electrification, where the 10-K credits growth to "increased content per vehicle", and AI data-center connectivity.
- The business earns a genuine premium return, about 22 percent on equity, but the price already assumes roughly 18.7 percent annual operating growth for five years, a pace only about 39 percent of comparable fast-growers sustained over that span.
- The next print lands July 22, 2026, with management guiding near $5.0 billion of quarterly sales; watch whether the AI and electrification order strength that drove 15 percent sales growth last quarter holds.
Bull Case
TE Connectivity is a mature industrial compounder that has quietly repositioned into two growth markets, and that reframing is the bull case. The core business, connectors and sensors, is about as unglamorous as manufacturing gets, yet the company earns roughly 22 percent on equity while the connectors ride into cars and data centers that need more of them every year. Its own 10-K attributes organic growth in the Asia-Pacific region to "vehicle production growth as well as increased content per vehicle", which is the electrification thesis stated in the company's own words: an electric vehicle carries far more of TE's product than a combustion one, so the content grows even when unit volumes do not.
The second engine is newer and faster. AI data centers demand dense, high-speed connectivity, and TE's communications-oriented segment has become the momentum story, with management flagging AI and data-center demand as a multi-year growth driver. The most recent quarter showed the two tailwinds compounding: about 15 percent sales growth and 24 percent earnings growth, with record orders across all segments. That is not the profile of a sleepy industrial; it is a business whose end markets are inflecting at the same time.
Capital returns and a defensible balance sheet round out the case. The 10-K reports dividends paid of "$ 2.72" per share in fiscal 2025, up from $2.48 and $2.30 in the two prior years, a steadily rising payout, and the share count has fallen about 2.5 percent a year over four years as buybacks retire stock. Interest coverage sits near 31 times against manageable net debt, so the dividend growth and buybacks are funded from real cash flow rather than leverage. A high-return industrial with two secular tailwinds, a rising dividend, and a shrinking share count is the kind of quality that earns a premium multiple, and the durability of that compounding is precisely what the price is paying for. The bull's task is to argue that the durability is real; the bear's is to argue it is priced past proof.
Bear Case
The variable with the most leverage on this thesis is the one TE controls least: the automotive and industrial capital cycle. A majority of the company's revenue still rides on vehicle production and factory investment, both of which turn with rates, tariffs, and macro confidence. The 10-K is candid that the transportation business can shrink even in a good year, noting net sales in the Transportation Solutions segment "decreased $93 million, or 1.0%, in fiscal 2025 from fiscal 2024" on organic weakness. A connector maker priced for durable compounding is exposed to a demand air pocket in autos or industrial capex that no amount of content-per-vehicle growth can fully offset, and the current price gives that cyclicality little room.
The competitive structure compounds the sensitivity. TE's own filing describes "highly competitive markets for electronic components" and warns of pricing dynamics that "could in the future negatively impact our prices, margins, and market share". It competes against Amphenol, Corning, Sensata, and Vishay in markets where scale and price both matter, which caps how much of the AI and electrification upside actually accrues to TE rather than being competed away. The AI data-center demand is real, but so is every rival's incentive to chase the same sockets, and a commoditizing component business does not hold premium pricing indefinitely.
That is why the valuation is the crux. At about 18 times company-wide operating income, the price implies roughly 18.7 percent annual operating growth sustained for five years, and only about 39 percent of comparable fast-growers held that pace over a similar span. The methods make the stretch visible: only the forward-growth family reaches the price, while asset value, earnings power, and peer multiples all land below it. A zero-growth capitalization of current free cash flow supports a value roughly 45 percent under today's level, and peer multiples put fair value more than a fifth below. The stock is not expensive because the business is weak; it is expensive because the price has already booked years of the growth acceleration as if it were certain. If autos wobble or the AI order rate normalizes, the durability premium is the first thing to compress.
Valuation
At $200.28, TE Connectivity trades at about 18 times company-wide operating income, which inverts to a bet that operating profit grows roughly 18.7 percent a year for five years. Keep those figures approximate; they are one consistent solve. Two references frame the demand: the recent pace is within what the company has actually delivered, so the rate is not fanciful, but only about 39 percent of comparable fast-growers sustained that pace over five years, so the durability is the stretch. Notably the multiple sits in the lower half of the peer range, which is the market's way of saying it credits the growth but not without discipline.
The methods sort cleanly, and the pattern is the finding. Only the forward-growth family reaches the price. The asset-based, earnings-power, and peer-multiple lenses all land below it: a zero-growth capitalization of free cash flow sits well under the price, peer multiples put fair value more than a fifth lower, and even Graham-style floors land beneath today. That configuration, where the static frames say richly valued and only the growth methods reach the price, is the signature of a durability premium, a bet on compounding the backward-looking methods structurally cannot price. Return on equity near 22 percent is the evidence the market points to that the compounding is real; the low return on invested capital of about 4.9 percent, weighed down by acquisition goodwill, is the counterweight the bears point to.
Solvency does not constrain the story. Net debt of about $4.5 billion against interest coverage near 31 times is modest for a business of this cash generation, leverage runs roughly 1.2 times operating income, and the share count has fallen about 2.5 percent a year. The balance sheet is a support, not a risk. The decisive question for a buyer is therefore not whether TE can pay its bills but whether the roughly 18.7 percent growth the price assumes survives contact with the automotive cycle. The premium is entirely a wager on the durability of the current inflection, and the next several prints are where that wager gets tested.
Catalysts
The story has been running hot. The most recent quarter delivered about 15 percent sales growth and 24 percent earnings growth with record orders across all segments, driven by AI data-center and electrification demand. Management has pointed to AI architectures and data-center connectivity as a multi-year growth driver, and analysts have leaned into the setup for the next print.
The next dated event is fiscal third-quarter results on July 22, 2026. Management has guided to roughly $5.0 billion of quarterly sales with double-digit year-over-year growth in both sales and EPS. Consensus sits at about $2.84 for Q3 adjusted EPS, up roughly 25 percent from the year-ago quarter, and near $11.31 for full-year fiscal 2026 adjusted EPS. Those are non-GAAP analyst figures and should be read as estimates rather than reported results.
The watch items are concrete: whether the AI and data-center order strength that powered the last quarter holds or decelerates, whether the transportation segment stabilizes after its fiscal 2025 organic dip, and whether management's sales guidance proves conservative as it did last quarter. Given the price already assumes years of sustained growth, the market's reaction is likely to hinge less on the headline beat and more on the order book and forward commentary that signal whether the current pace is durable.
Peer Cohorts (Per Segment, With Filing Citations)
As of or for the fiscal year ended September 26, 2025 / As of or for the fiscal year ended September 27, 2024 / As of or for the fiscal year ended September 29, 2023 (reported)
- APH (AMPHENOL CORP /DE/)
- (no filing in the citation store)
- GLW (CORNING INC /NY)
- (no filing in the citation store)
- ST (SENSATA TECHNOLOGIES HOLDING PLC)
- (no filing in the citation store)
- VSH (VISHAY INTERTECHNOLOGY INC)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
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
Q3 FY2026 earnings preview and Q2 FY2026 results · Q2 FY2026 results · Q3 FY2026 earnings preview · analyst consensus via Yahoo Finance, July 2026