Teledyne Technologies Incorporated's (NYSE:TDY) Fundamentals Look Pretty Strong: Could The Market Be Wrong About The Stock? – Yahoo Finance
Teledyne Technologies (NYSE:TDY) has had a rough week with its share price down 5.0%. However, the company’s fundamentals look pretty decent, and long-term financials are usually aligned with future market price movements. Particularly, we will be paying attention to Teledyne Technologies’ ROE today.
Return on equity or ROE is a key measure used to assess how efficiently a company’s management is utilizing the company’s capital. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company’s shareholders.
View our latest analysis for Teledyne Technologies
The formula for return on equity is:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity
So, based on the above formula, the ROE for Teledyne Technologies is:
9.4% = US$724m ÷ US$7.7b (Based on the trailing twelve months to October 2022).
The ‘return’ is the profit over the last twelve months. Another way to think of that is that for every $1 worth of equity, the company was able to earn $0.09 in profit.
So far, we’ve learned that ROE is a measure of a company’s profitability. Based on how much of its profits the company chooses to reinvest or “retain”, we are then able to evaluate a company’s future ability to generate profits. Assuming everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don’t necessarily bear these characteristics.
At first glance, Teledyne Technologies’ ROE doesn’t look very promising. We then compared the company’s ROE to the broader industry and were disappointed to see that the ROE is lower than the industry average of 14%. Teledyne Technologies was still able to see a decent net income growth of 18% over the past five years. So, there might be other aspects that are positively influencing the company’s earnings growth. For instance, the company has a low payout ratio or is being managed efficiently.
Next, on comparing Teledyne Technologies’ net income growth with the industry, we found that the company’s reported growth is similar to the industry average growth rate of 18% in the same period.
Earnings growth is an important metric to consider when valuing a stock. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. This then helps them determine if the stock is placed for a bright or bleak future. Is TDY fairly valued? This infographic on the company’s intrinsic value has everything you need to know.
Given that Teledyne Technologies doesn’t pay any dividend to its shareholders, we infer that the company has been reinvesting all of its profits to grow its business.
Overall, we feel that Teledyne Technologies certainly does have some positive factors to consider. Even in spite of the low rate of return, the company has posted impressive earnings growth as a result of reinvesting heavily into its business. Having said that, the company’s earnings growth is expected to slow down, as forecasted in the current analyst estimates. To know more about the company’s future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more.
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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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