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Teradyne (TER) Hits Fresh High: Is There Still Room to Run?

Have you been paying attention to shares of Teradyne (TER)? Shares have been on the move with the stock up 28% over the past month. The stock hit a new 52-week high of $149.95 in the previous session. Teradyne has gained 23.6% since the start of the year compared to the 28.7% move for the Zacks Computer and Technology sector and the 17.3% return for the Zacks Electronics - Testing Equipment industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on October 26, 2021, Teradyne reported EPS of $1.59 versus consensus estimate of $1.45.

For the current fiscal year, Teradyne is expected to post earnings of $5.89 per share on $3.68 billion in revenues. This represents a 27.49% change in EPS on a 18.03% change in revenues. For the next fiscal year, the company is expected to earn $6.29 per share on $3.9 billion in revenues. This represents a year-over-year change of 6.85% and 5.82%, respectively.

Valuation Metrics

Teradyne may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.

Teradyne has a Value Score of C. The stock's Growth and Momentum Scores are A and D, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 25.2X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 26.5X versus its peer group's average of 27.6X. Additionally, the stock has a PEG ratio of 1.52. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Teradyne currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Teradyne fits the bill. Thus, it seems as though Teradyne shares could have potential in the weeks and months to come.


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