Why Fundamentally Sound Teradyne Stock Can't Get Moving in 2021

Teradyne stock is up by 55% since its annual lows

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Teradyne, Inc. (NASDAQ:TER) is an American automatic test equipment designer and manufacturer. Teradyne’s test solutions for semiconductors, electronic systems, wireless devices and more ensure that products perform as they were designed. TER's Industrial Automation offerings include collaborative and mobile robots that help manufacturers of all sizes improve productivity and lower costs. Teradyne's high-profile customers include Samsung, Qualcomm (QCOM), Intel (INTC), Analog Devices (ADI), Texas Instruments (TXN), and IBM (IBM).

Teradyne stock has increased by approximately 25% in price year-over-year, and is trading up 55% since bottoming at an annual low of $74.08 last September. However, shares of TER are down roughly 3.4% year-to-date and Teradyne stock has dropped 21% since reaching a record high of $147.90 in February. Moreover, Teradyne offers a forward dividend of $0.40 and a dividend yield of 0.34%.

On the earnings front, Teradyne has outperformed Wall Street's earnings expectations on all four of its most recent reports. For Q3 of 2020, TER beat analysts’ estimates by a margin of $0.06, reporting an EPS of $1.18. For Q4 of 2020, Teradyne's EPS decreased to $1.10 while still beating expectations by a margin of $0.09. For Q1 of 2021, TER reported a slight increase in earnings, rising to $1.11 per share. The automatic testing company also beat estimates by a margin of $0.06. In the most recent quarterly report on Q2 of 2021, Teradyne reported an EPS of $1.91 and beat expectations by a margin of $0.15.

From a fundamental point of view, Teradyne stock’s valuation is on the pricier end while TER's recent growth suggests the stock’s price-earnings ratio of 22.68 may be worth it for long-term investors. The company’s revenues are up 50% and net income has increased by more than 100% as compared to fiscal 2019. In addition, TER sports a forward price-earnings ratio of 21.79, which would be a slight improvement if analysts’ predictions are correct. Teradyne has $1.24 billion in cash on its balance sheet and only $427 million in total debt, making the company’s fundamentals solid all around, and further justifying its somewhat high valuation.

 

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