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TE Connectivity (NYSE:TEL) Intrinsic Value: DCF (Earnings Based)

: $131.05 (As of Today)
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As of today (2024-02-20), TE Connectivity's intrinsic value calculated from the Discounted Earnings model is $131.05.

Note: Discounted Earnings model is only suitable for predictable companies (Business Predictability Rank higher than 1-Star). If the company's predictability rank is 1-Star or Not Rated, result may not be accurate due to the low predictability of business and the data will not be stored into our database.

TE Connectivity's Predictability Rank is 4-Stars.

Margin of Safety (Earnings Based) using Discounted Earnings model for TE Connectivity is -7.00%.

The historical rank and industry rank for TE Connectivity's Intrinsic Value: DCF (Earnings Based) or its related term are showing as below:

TEL' s Price-to-DCF (Earnings Based) Range Over the Past 10 Years
Min: 0.86   Med: 1.07   Max: 1.09
Current: 1.07

During the past 13 years, the highest Price-to-Intrinsic-Value-DCF (Earnings Based) Ratio of TE Connectivity was 1.09. The lowest was 0.86. And the median was 1.07.

TEL's Price-to-DCF (Earnings Based) is ranked worse than
59.33% of 300 companies
in the Hardware industry
Industry Median: 0.905 vs TEL: 1.07

TE Connectivity Intrinsic Value: DCF (Earnings Based) Historical Data

The historical data trend for TE Connectivity's Intrinsic Value: DCF (Earnings Based) can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* Premium members only.

TE Connectivity Annual Data
Trend Sep14 Sep15 Sep16 Sep17 Sep18 Sep19 Sep20 Sep21 Sep22 Sep23
Intrinsic Value: DCF (Earnings Based)
Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only - - - 128.32 114.80

TE Connectivity Quarterly Data
Mar19 Jun19 Sep19 Dec19 Mar20 Jun20 Sep20 Dec20 Mar21 Jun21 Sep21 Dec21 Mar22 Jun22 Sep22 Dec22 Mar23 Jun23 Sep23 Dec23
Intrinsic Value: DCF (Earnings Based) Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 124.62 122.48 131.36 114.80 131.05

Competitive Comparison

For the Electronic Components subindustry, TE Connectivity's Price-to-DCF (Earnings Based), along with its competitors' market caps and Price-to-DCF (Earnings Based) data, can be viewed below:

* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.


TE Connectivity Price-to-DCF (Earnings Based) Distribution

For the Hardware industry and Technology sector, TE Connectivity's Price-to-DCF (Earnings Based) distribution charts can be found below:

* The bar in red indicates where TE Connectivity's Price-to-DCF (Earnings Based) falls into.



TE Connectivity Intrinsic Value: DCF (Earnings Based) Calculation

This is the intrinsic value calculated from the Discounted Earnings model with default parameters. The calculation method is the same as Discounted Cash Flow model except earnings are used in the calculation instead of free cash flow. This is the default method of calculation with GuruFocus DCF calculator.

Usually a two-stage model is used in calculating the intrinsic value with discounted cash flow model. The first stage is called growth stage; the second is called the terminal stage. In the growth stage the company grows at a faster rate. Because it cannot grow at that rate forever, a lower rate is used for the terminal stage.

GuruFocus DCF calculator is a two-stage model. The default values are defined as:

1. Discount Rate: d = 7%
A reasonable discount rate assumption should be at least the long term average return of the stock market, which can be estimated from risk free rate plus risk premium of stock market. GuruFocus uses 10-Year Treasury Constant Maturity Rate as the risk-free rate and rounded up to the nearest integer. It is updated daily. The current risk-free rate is 0.66%. Please go to Economic Indicators page for more information. Please note that we use the 10-Year Treasury Constant Maturity Rate of the country/region where the company is headquartered. If the data for that country/region is not available, then we will use the 10-Year Treasury Constant Maturity Rate of the United States as default. Then we added a risk premium of 6% to get the estimated discount rate. Some investors use their expected rate of return, which is also reasonable. A typical discount rate can be anywhere between 6% - 20%.

2. Growth Rate in the growth stage: g1 = 7.00%
The Growth Rate in the growth stage is initially set as the default 10-Year EPS without NRI Growth Rate. In cases where the 10-year growth rate is unavailable, it defaults to using the 5-Year EPS without NRI Growth Rate. If both the 10-year and 5-year growth rates are unavailable, the system defaults to the 3-Year EPS without NRI Growth Rate.
However, it's important to note that there is a growth rate range. If the calculated growth rate exceeds 20%, it will be capped at 20%. Conversely, if the calculated growth rate falls below 5%, it will be adjusted to 5% to maintain a reasonable range.
=> TE Connectivity's average EPS without NRI Growth Rate in the past 10 years was 7.00%, which is between 5% and 20%. => GuruFocus defaults => Growth Rate: 7.00%

3. Years of Growth Stage: y1 = 10

4. Terminal Growth Rate: g2 = 4%

5. Years of Terminal Growth: y2 = 10

6. EPS without NRI: eps without nri = $7.053.
GuruFocus DCF calculator is actually a Discounted Earnings calculator, EPS without NRI is used as the default. The reason we are doing this is we found that historically stock prices are more correlated with earnings than free cash flow.

All of the default settings can be changed and the results are calculated automatically.

TE Connectivity's Intrinsic Value: DCF (Earnings Based) for today is calculated as:

Intrinsic Value: DCF (Earnings Based)=EPS without NRI*{[(1+g1)/(1+d)+(1+g1)^2/(1+d)^2+...+(1+g1)^10/(1+d)^10]
+(1+g1)^10/(1+d)^10*[(1+g2)/(1+d)+(1+g2)^2/(1+d)^2+...+(1+g2)^10/(1+d)^10]}

set x = (1+g1)/(1+d) = (1+0.07)/(1+0.07) = 1
and y = (1+g2)/(1+d) = (1+0.04)/(1+0.07) = 0.97196261682243

Intrinsic Value: DCF (Earnings Based)=EPS without NRI*{[x+x^2+...+x^10]+x^10*[y+y^2+...+y^10]}
=EPS without NRI*[x*(1-x^10)/(1-x)+x^10*y*(1-y^10)/(1-y)]
=7.053*18.5807
=131.05

Margin of Safety % (DCF Earnings Based)=(Intrinsic Value: DCF (Earnings Based)-Current Price)/Intrinsic Value: DCF (Earnings Based)
=(131.05-140.22)/131.05
=-7.00 %

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.


TE Connectivity  (NYSE:TEL) Intrinsic Value: DCF (Earnings Based) Explanation

Unlike valuation methods such as Net Current Asset Value, Tangible Book Value per Share, Graham Number, Median Ratio etc, discounted Cash Flow model evaluates the companies based on their future earnings power instead of their assets.


Be Aware

What you need to know about Discounted Earnings model:

1. The Discounted Earnings model evaluates a company based on its future earnings power
2. Growth is taken into account; therefore a faster growth company is worth more if everything else is the same.
3. Since we are projecting future growth, it is assumed that the company will grow at the same rate as it did during the past 10 years. Therefore this model works better for the companies that are relatively consistent performers.
4. The Discounted Earnings model works poorly for inconsistent performers like cyclicals.
5. Your expected return from the investment is a reasonable discount rate assumption.
6. A larger margin of safety should be required for companies with less predictable businesses.

You can screen for stocks that trade below their Intrinsic Value: DCF (FCF Based) and Intrinsic Value: DCF (Earnings Based) with the GuruFocus All-in-One Screener. Companies with a high Predictability Rank that trade at a discount to their Intrinsic Value: DCF (FCF Based) and Intrinsic Value: DCF (Earnings Based) can be found in the screen of Undervalued Predictable Companies.


TE Connectivity Intrinsic Value: DCF (Earnings Based) Related Terms

Thank you for viewing the detailed overview of TE Connectivity's Intrinsic Value: DCF (Earnings Based) provided by GuruFocus.com. Please click on the following links to see related term pages.


TE Connectivity (NYSE:TEL) Business Description

Industry
GURUFOCUS.COM » STOCK LIST » Technology » Hardware » TE Connectivity Ltd (NYSE:TEL) » Definitions » Intrinsic Value: DCF (Earnings Based)
Traded in Other Exchanges
N/A
Address
Muhlenstrasse 26, Schaffhausen, CHE, CH-8200
TE Connectivity is the largest electrical connector supplier in the world, supplying interconnect and sensor solutions to the transportation, industrial, and communications markets. With operations in 150 countries and over 500,000 stock-keeping units, TE has a broad portfolio that forms the electrical architecture of its end customers' cutting-edge innovations.
Executives
Terrence R Curtin director, officer: EVP & Chief Financial Officer C/O TYCO ELECTRONICS LTD., 1050 WESTLAKES DRIVE, BERWYN PA 19312
John S Jenkins officer: EVP & General Counsel 1050 WESTLAKES DRIVE, BERWYN PA 19312
Heath A Mitts officer: EVP & Chief Financial Officer 1925 WEST FIELD COURT, SUITE 200, LAKE FOREST IL 60045
Malavika Sagar officer: SVP, Chief Human Resources Off 1050 WESTLAKES DRIVE, BERWYN PA 19312
Jean-pierre Clamadieu director 1050 WESTLAKES DRIVE, BERWYN PA 19312
Shadrak W Kroeger officer: Pres., Communications Solution 1050 WESTLAKES DRIVE, BERWYN PA 19312
Abhijit Y Talwalkar director ONE AMD PLACE, PO BOX 3453, SUNNYVALE CA 94088
Tim Murphy officer: SVP & CHRO 1050 WESTLAKES DRIVE, BERWYN PA 19312
Thomas J Lynch director, officer: Chief Executive Officer 7 LAKEVIEW DRIVE, NEWTOWN PA 19840
Syaru Shirley Lin director
Robert J Ott officer: Sr VP & Controller C/O TYCO ELECTRONICS LTD, 1050 WESTLAKES DRIVE, BERWYN PA 19312
Steven T Merkt officer: President, Transportation Sol. 1050 WESTLAKES DRIVE, BERWYN PA 19312
Daniel J Phelan director C/O TYCO ELECTRONICS LTD., 1050 WESTLAKES DRIVE, BERWYN PA 19312
Aaron Kyle Stucki officer: Pres. Communications Solutions 1050 WESTLAKES DRIVE, BERWYN PA 19312
Eric Resch director, officer: SVP and Tax Officer C/O TYCO ELECTRONICS LTD., 1050 WESTLAKES DRIVE, BERWYN PA 19312