Teledyne Technologies IncorporatedTDYNYSE

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DCF Valuation

DCF Valuation Summary

Hold

Fair Value: $784.03 per share(market-calibrated)

+14.7%

Upside to Fair Value

Current

$683.64

Pure Model

$780.99

Fair Value

$784.03

Bull Case

$979.15

Bear Case

$611.57

Market Reality Check

Model Terminal Growth

3.75%

Market-Implied Growth

4.15%

Calibrated Growth

3.81%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $780.99.

What's Driving This Ratingfor TDY

✓

CapEx already efficient

CapEx at 1.67% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 23.55% — below the sector mature average of 25.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $2.3B (24.70% margin).

→

Moderate revenue growth

Analyst consensus projects 4.40% revenue growth, fading to 3.75% by Year 10. Revenue reaches $9.2B (vs $6.1B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $639.78/share (22.2x terminal FCF) while exit multiple gives $922.20/share (36.2x terminal FCF). The 28x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.75% growth is more conservative. The base case averages both methods.

✓

Model and market roughly agree

Market-implied terminal growth of 4.15% is close to the model's 3.75% (only 40bps apart). The DCF assumptions are well-aligned with how the market is pricing this stock.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 77.34% indicates efficient cash generation. FCF reaches $2.1B by Year 10 (23.31% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.97

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)8.89%

Cost of Debt

Pre-tax Cost of Debt3.03%

Tax Rate18.16%

After-tax Cost of Debt2.48%

Equity Weight (E/V)92.90%

Debt Weight (D/V)7.10%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (92.90% × 8.89%) + (7.10% × 2.48%)

= 8.43%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$6.4B	$7.1B	$7.6B	$8.2B	$9.2B
EBIT	$1.5B	$1.7B	$1.8B	$2.0B	$2.3B
Tax	$273M	$302M	$334M	$365M	$412M
NOPAT	$1.2B	$1.4B	$1.5B	$1.6B	$1.9B
+ Depreciation	$348M	$384M	$416M	$448M	$501M
- Capex	$107M	$118M	$127M	$137M	$153M
- Δ NWC	$50M	$64M	$52M	$56M	$62M
Free Cash Flow	$1.4B	$1.6B	$1.7B	$1.9B	$2.1B
Discount Factor	0.922	0.784	0.667	0.567	0.445
Present Value	$1.3B	$1.2B	$1.2B	$1.1B	$953M

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$2.1B

Terminal Growth Rate3.75%

WACC8.43%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$47.4B

PV of Terminal Value$21.1B

Exit Multiple Method

Year 10 EBITDA$2.8B

Exit Multiple (EV/EBITDA)28.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$77.5B

PV of Terminal Value$34.5B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$11.3B

PV of Terminal Value$21.1B

Enterprise Value$32.4B

(-) Net Debt$2.1B

Equity Value$30.3B

Shares Outstanding47M

Price per Share$639.78

Exit Multiple Method

PV of Projected FCFs$11.3B

PV of Terminal Value$34.5B

Enterprise Value$45.8B

(-) Net Debt$2.1B

Equity Value$43.7B

Shares Outstanding47M

Price per Share$922.20

Pure Model Fair Value

$780.99

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.75%	3.25%	3.75%	4.25%	4.75%
6.43%	$995.33	$1,050.31	$1,125.77	$1,235.82	$1,256.03
7.43%	$847.50	$877.75	$916.20	$966.74	$1,036.11
8.43%	$740.03	$758.53	$780.99	$808.81	$844.19
9.43%	$656.26	$668.40	$682.68	$699.72	$720.39
10.43%	$588.03	$596.41	$606.04	$617.23	$630.39

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$611.57

-10.5% vs current

• -25% vs analyst consensus
• Terminal growth: 3.3%
• Beta: 1.22

Base Case

$780.99

14.2% vs current

• Analyst consensus
• Terminal growth: 3.8%
• Beta: 0.97

Bull Case

$979.15

43.2% vs current

• +25% vs analyst consensus
• Terminal growth: 4.3%
• Beta: 0.83

Key Assumptions & Drivers• Technology Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth4.40%

Year 3 Revenue Growth5.08%

Year 5 Revenue Growth3.75%

Year 7 Revenue Growth3.75%

Year 10 Revenue Growth3.75%

Terminal Growth Rate3.75%

Margin & Efficiency

Current EBIT Margin23.55%

Terminal EBIT Margin25.00%

Tax Rate18.16%

Historical Capex / Rev1.67%

NWC / Revenue18.76%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 28x EV/EBITDA (Technology sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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