Is It Too Late To Consider Teradyne After Its 2025 Surge In AI Test Demand?

• Wondering if Teradyne is still attractive after its big run, or if you would just be paying up for yesterday's gains? This breakdown will help you think through whether the current price really makes sense.
• Teradyne's share price has climbed to about $198.53, with returns of 7.2% over the last week, 19.6% over the last month, and 56.9% year to date, building on a 53.4% gain over the past year and 138.7% over three years.
• That surge has come alongside growing interest in semiconductor test demand, automation, and robotics, as investors look for companies that could benefit from AI infrastructure and advanced chip cycles. Teradyne has also featured in several analyst and industry pieces highlighting its role in chip testing and factory automation, which has sharpened market focus on what its future cash flows might be worth.
• Despite that enthusiasm, Teradyne currently scores just 0 out of 6 on our undervaluation checks. We will walk through what different valuation methods indicate about the stock today, then finish with a broader way to think about what Teradyne might be worth.

Teradyne scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Teradyne Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a company might be worth by projecting the cash it can generate in the future and discounting those dollars back to today.

For Teradyne, the model starts with last twelve month Free Cash Flow of about $485.6 million and uses analyst forecasts for the next few years, then extrapolates further out. On this basis, Teradyne's Free Cash Flow is projected to rise to roughly $1.23 billion by 2029, with continued growth assumed through 2035. All of these cash flows are estimated in dollars and then discounted using a required rate of return to reflect time and risk.

Adding up those discounted cash flows gives an estimated intrinsic value of about $106.26 per share, using a 2 Stage Free Cash Flow to Equity framework. Compared with the current share price around $198.53, the DCF implies the stock is about 86.8% above its calculated fair value, signalling that investors are already paying a steep premium for future growth.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Teradyne may be overvalued by 86.8%. Discover 903 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Teradyne.

Approach 2: Teradyne Price vs Earnings

For profitable businesses like Teradyne, the Price to Earnings (PE) ratio is a useful way to judge valuation because it links what investors pay today with the company’s current earnings power. In general, faster growth and lower risk justify a higher PE multiple, while slower or more uncertain outlooks should trade on a lower, more conservative multiple.

Teradyne currently trades at about 70.17x earnings, which is well above the broader Semiconductor industry average of roughly 36.54x and also ahead of the peer group average of around 34.67x. To move beyond simple comparisons, Simply Wall St calculates a proprietary Fair Ratio for each company. This estimates what a reasonable PE multiple should be, given its earnings growth prospects, profitability, industry, size and specific risk profile.

For Teradyne, that Fair Ratio is 40.73x. This means the stock is trading at a substantial premium to what these fundamentals would typically warrant. Because this Fair Ratio adjusts for growth, risk and margins, it gives a more tailored benchmark than raw industry or peer averages. On that basis, Teradyne’s current PE suggests the shares are richly valued.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1460 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Teradyne Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple framework on Simply Wall St’s Community page where you connect your view of Teradyne’s story to a set of forecasts for revenue, earnings and margins. These then roll into a fair value you can compare with the current share price to decide whether to buy, hold or sell. The model updates dynamically as new news or earnings arrive and allows very different perspectives to coexist transparently on the same platform. For example, one investor might believe AI test demand and robotics expansion can justify a fair value near the upper end of recent targets, around $192 per share. Another, more cautious investor might anchor closer to the low end, near $85.

Do you think there's more to the story for Teradyne? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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