Investment Thesis
Teradyne demonstrates exceptional operational profitability with 60.9% gross margin and 31.1% net margin, supported by 13.1% revenue growth and zero debt with a fortress balance sheet. However, flat net income growth despite double-digit revenue growth signals potential margin compression requiring close monitoring of expense management and operational leverage.
Strengths
- Exceptional net margin (31.1%) and operating margin (36.9%) indicate strong pricing power and cost discipline
- Zero long-term debt with $241.9M cash and 2.15x current ratio provide financial flexibility and stability
- Solid free cash flow generation ($200.4M, 15.6% FCF margin) supports dividends or strategic investments
- Double-digit revenue growth (13.1% YoY) demonstrates market demand for test instrumentation solutions
Risks
- Net income flat (0% YoY) despite 13.1% revenue growth indicates margin compression or unexpected expense increases
- ROE (12.7%) and ROA (9.0%) moderate relative to exceptional operating profitability suggests capital efficiency challenges
- High insider activity (18 Form 4 filings in 90 days) warrants monitoring for potential insider knowledge of headwinds
- Dependence on semiconductor/electronics testing market exposes company to cyclical industry downturns
Key Metrics to Watch
- Net margin trend - critical to ensure compression does not continue
- Operating expense ratio - identify source of earnings growth deceleration
- Free cash flow conversion and sustainability of cash generation
- Capital expenditure requirements and return on invested capital improvements
Financial Metrics
Revenue
1.3B
Net Income
398.9M
EPS (Diluted)
$2.53
Free Cash Flow
200.4M
Total Assets
4.4B
Cash
241.9M
Profitability Ratios
Gross Margin
60.9%
Operating Margin
36.9%
Net Margin
31.1%
ROE
12.7%
ROA
9.0%
FCF Margin
15.6%
Balance Sheet & Liquidity
Current Ratio
2.15x
Quick Ratio
1.79x
Debt/Equity
0.00x
Debt/Assets
29.1%
Interest Coverage
150.11x
Long-term Debt
0.0
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-06T12:32:47.124131 |
Data as of: 2026-03-29 |
Powered by Claude AI