TERADYNE, INC. (TER): what the price requires
At today's price, TERADYNE, INC. (TER) is priced for today's economics sustained for ~18.6 years. 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/TER
Headline
| Field | Value |
|---|---|
| Ticker | TER |
| Company | TERADYNE, INC. |
| Sector / Industry | Technology / Scientific Instruments |
| Current price | $344.47/sh |
| Composition | Products 83% / Services 17% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin today | 24.5% |
| Must persist for | 18.6y |
| Multiple paid | 64x operating income |
Solve inputs: computed at a 13.4% cost of capital; growth searched up to the 27.3% self-funding ceiling; each 1pp moves the implied horizon ~2.4 years.
Reconcile: at the x-ray's 9.3% required return this reads ~10.3 years; the models below use their own rates.
How unusual the bet is: high
| Reference | Value |
|---|---|
| vs own history | +0.83σ |
| cohort percentile (of 177 peers) | 89 |
| sustained it ~10 years at this level | 11% |
| 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 | 5.88x | 5 | expensive |
| Earnings | 5.91x | 5 | expensive |
| Relative | 1.87x | 5 | expensive |
| Growth | 0.77x | 3 | justifies |
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 9.2%); the inversion above states its own rate.
Per-Model Detail (n=18)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $210.22 | 1.64x | yes | FCF base $0.7B, growth 25% (input: historical growth), terminal g 4.0%, WACC 9.2%, 7yr projection |
| DCF Exit Multiple | Growth | $445.74 | 0.77x | yes | Exit EV/EBITDA: 45.0x / 48.0x / 51.0x (bear / base = today's held flat / bull), 7yr |
| Relative Valuation | Relative | $184.50 | 1.87x | yes | P/E 31.67x (blended: static sector reference 18x + trailing (TTM) 64x), scenarios: 25.3x / 31.7x / 38.0x (bear / base = reference held flat / bull), EV/EBITDA 22.81x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $58.57 | 5.88x | yes | BV/sh $19.94, ROE (TTM) 27.2%, ke 9.3% |
| Two-Stage Excess Return | Asset | $101.95 | 3.38x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $499.52 | 0.69x | yes | Rev $3.8B, growth 30% (input: historical growth; tapered), Terminal P/S: 9.6x / 12.0x / 14.4x (bear / base = today's held flat / bull, cap 12x) |
| Peter Lynch Fair Value | Relative | $188.65 | 1.83x | yes | EPS $5.39, growth 35% (input: historical EPS growth), PEG=1.82 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $58.55 | 5.88x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.83B × (1−13%) / WACC 9.2% → EPV (no growth) |
| Residual Income | Asset | $87.88 | 3.92x | yes | BV $19.94 + 5yr PV of (ROE (TTM) 27.2% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $49.18 | 7.00x | yes | √(22.5 × EPS $5.39 × BVPS $19.94) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $85.47 | 4.03x | yes | EBITDA $1.13B × sector EV/EBITDA 12.0x |
| FCF Yield | Earnings | $37.19 | 9.26x | yes | FCF $553.2M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $32.34 | 10.65x | yes | SBC-adj FCF $0.48B (FCF $0.55B − SBC $0.07B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $173.92 | 1.98x | yes | EPS $5.39 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $27.25 | 12.64x | yes | BV $19.94 × (ROIC 12.6% / WACC 9.2%) |
| P/Sales Sector | Relative | $60.06 | 5.74x | yes | Revenue $3.79B × sector P/S 2.5x |
| PEG Fair Value | Relative | $202.13 | 1.70x | yes | EPS $5.39 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $58.27 | 5.91x | yes | EPS $5.39 / 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 cash | $241.9m |
| Net debt / NOPAT (after-tax) | -0.34x (net cash) |
| Net debt / operating income (pre-tax) | -0.29x (net cash) |
| Interest coverage | 136.9x |
| Share count CAGR (buyback) | -2.3% |
| Burning cash | no |
Bullet Takeaways
- Teradyne makes the automatic test equipment that verifies semiconductors work, and the AI buildout has become its dominant driver: AI-related demand was nearly 70% of Q1 2026 revenue, up from about 60% the prior quarter.
- The biggest risk is that this is a cyclical business priced for a permanent boom: at a P/E of 66 no valuation method except forward growth reaches the price, and semiconductor test demand has historically swung hard.
- Watch memory-test momentum (HBM and DRAM for AI) and the long-term model management reiterated of $6 billion revenue and $9.50 to $11.00 EPS.
Bull Case
What the market is pricing here is a structural shift in Teradyne's end demand, and the recent fundamentals show why. For years semiconductor test was a mature, cyclical business tied to consumer electronics and mobile. Now the AI compute buildout has become the driver: AI-related demand was nearly 70% of Q1 2026 revenue, up from about 60% the prior quarter, and it is showing up in the numbers as a step-change, not a wobble. Quarterly revenue rose 87% year over year to $1.28 billion, and operating margin expanded from 13.9% to 36.9% over the last four quarters as the higher-value AI test work carried the mix upward. The market is paying for a business that is being repriced from cyclical component supplier to essential AI-infrastructure toll.
The technology position backs the demand. Teradyne's Semiconductor Test segment (the FY2025 10-K describes it as "the design, manufacturing and marketing of semiconductor test products and services inclusive of storage and system level test products") generated $1,111 million of the quarter's revenue, and memory revenue of $203 million held near a record on robust HBM and DRAM demand, the exact memory types AI accelerators consume. Management noted memory test demand is even stronger than it expected in January, with the newest Magnum 7 tester generation ramping. Testing gets harder and more valuable as chips get more complex, and AI chips are the most complex yet.
The balance sheet and optionality complete the case. Teradyne carries net cash with an Altman score of 7.87, so it can invest through any downturn, and it holds a robotics business (collaborative arms and autonomous mobile robots) that is a separate call option on factory automation. Management reiterated a long-term model of $6 billion in revenue and $9.50 to $11.00 in EPS. Free cash flow funds a growing dividend and $550 million of trailing buybacks. The bull case is that AI has structurally raised the floor under semiconductor test, and Teradyne is the purest large-cap way to own that.
Bear Case
Look at how Teradyne is spending its cash against where its earnings sit in the cycle, and a capital-allocation question surfaces. The company repurchased $550 million of stock over the trailing year, buying its own shares at a price of roughly 66 times earnings while its profitability is running at what may be a cyclical peak. Retiring stock at that multiple, funded by earnings inflated by an AI-demand surge that took AI to nearly 70% of revenue, is the kind of buyback that destroys value if the cycle mean-reverts: the company pays a premium price for shares today and the earnings that justified the premium fade tomorrow. Management is signaling confidence, but confidence expressed through buybacks at peak multiples is a bet shareholders are underwriting whether they chose it or not.
The concentration underneath the boom is real. The FY2025 10-K discloses that in 2025 the company had "two customers who specified greater than 10% of our consolidated revenues and one additional customer who directly purchased more than 10%", and that "significant customers decided to stop buying and using our products with limited advance notice" is a named risk. Test-equipment orders are lumpy and can be cut fast when a chipmaker pauses capacity. Add geographic exposure: 89% of 2025 sales were outside the United States, and the 10-K flags U.S. export-control regulations "restricting transactions with certain customers in China", a policy variable entirely outside the company's control that bears directly on its largest region.
The valuation prices none of this cyclicality in. Only the forward-growth method reaches today's price; the asset, earnings-power, and peer-multiple lenses all read it as richly valued, the first two at seven times what they support. Inverting the price, the market is paying about 66x company-wide operating income and implicitly assuming growth held near the self-funding ceiling for close to 19 years, a persistence only about 11% of comparable fast-growers managed for even a decade. Semiconductor test is one of the most cyclical corners of technology, and the current earnings reflect an AI-driven high. Buying back stock into that high, at that multiple, is the capital-allocation decision the bear would question most.
Valuation
Teradyne's price is a growth bet that no other method endorses. At $359.61 (July 11, 2026), only the forward-growth method reaches the price; the asset-based and earnings-power lenses read the stock at roughly seven times what they support, and even the peer-multiple lens sits well below the price. When only the growth frame reaches it, the market is paying a durability premium the static methods cannot capture, a bet that the AI-driven surge in semiconductor test is a lasting re-rating rather than a cyclical spike. That premium is the entire valuation, and the honest read is that it is elevated: above what the fundamentals comfortably support.
Inverting the price shows how demanding the bet is. The market is paying about 66x company-wide operating income and, in effect, assuming Teradyne holds growth near its self-funding ceiling for roughly 19 years. Only about 11% of comparable fast-growers sustained that pace for even ten. The two operating-income bases in the data (a record basis near $830 million and an EDGAR trailing basis near $1.0 billion, about 17% apart) both reflect the recent margin surge, from 13.9% to 36.9% operating margin over four quarters, which is itself the cyclical signal: current profitability is running well above the business's historical norm, so any method anchored on trailing earnings is anchored on a high.
Solvency is a non-issue and it clarifies the nature of the bet. The balance sheet is net cash, so there is no financial pressure on the way to whatever the cycle delivers, and free cash flow funds the dividend and the buyback. That means the valuation question is purely about durability: is AI-related test demand, now nearly 70% of revenue, a permanent new floor, or is it a cyclical peak that will normalize like every prior semiconductor test cycle? The price answers permanent, with 19 years of conviction. The methods, and the history of the industry, counsel that the floor is probably lower than the current run rate suggests.
Catalysts
Q1 2026 was a record quarter driven by AI. Teradyne reported revenue of $1,282 million ($1,111 million Semiconductor Test, $91 million Robotics, $80 million Product Test) and GAAP net income of $398.9 million, or $2.53 per diluted share. AI-related demand represented nearly 70% of revenue, up from about 60% in Q4 2025, spanning both compute and memory. Memory revenue of $203 million held near a record on robust HBM and DRAM demand, with the newest Magnum 7 memory tester ramping and management describing memory test demand as even stronger than its January view.
Guidance framed continued strength with a wider range. For Q2 2026 Teradyne guided revenue of $1.15 billion to $1.25 billion and non-GAAP EPS of $1.86 to $2.15, and reiterated its long-term model of $6 billion in revenue and $9.50 to $11.00 in EPS. The items to watch are whether AI compute and memory test demand sustains at these levels or shows the lumpiness typical of test-equipment orders, the trajectory of the smaller robotics segment as a separate automation option, and U.S. export-control developments affecting sales to China given that 89% of revenue is international. The Q2 2026 report is the next checkpoint on whether the AI-driven demand is holding.
Peer Cohorts (Per Segment, With Filing Citations)
Semiconductor Test (reported)
- COHU (COHU INC)
- (no filing in the citation store)
- FORM (FormFactor, Inc.)
- (no filing in the citation store)
- AEHR (AEHR TEST SYSTEMS)
- (no filing in the citation store)
- KLAC (KLA CORPORATION)
- (no filing in the citation store)
- ONTO (ONTO INNOVATION INC.)
- (no filing in the citation store)
- NVMI (NOVA LTD.)
- (no filing in the citation store)
Robotics / Product Test (reported)
- KLAC (KLA CORPORATION)
- (no filing in the citation store)
- ONTO (ONTO INNOVATION INC.)
- (no filing in the citation store)
- NVMI (NOVA LTD.)
- (no filing in the citation store)
- CAMT (CAMTEK LTD)
- (no filing in the citation store)
- COHU (COHU INC)
- (no filing in the citation store)
- FORM (FormFactor, Inc.)
- (no filing in the citation store)
- AEHR (AEHR TEST SYSTEMS)
- (no filing in the citation store)
- MKSI (MKS 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
Q1 2026 earnings release · Q1 2026 earnings call · FY2025 10-K