• This article examines whether TE Connectivity at US$205.11 still offers value, or if most of the opportunity is already reflected in the price, and explains the key points in straightforward terms.
• The stock is down 0.5% over the last week and 12.4% over the last month, while the 1 year return is 26.9% and the 3 year return is 72.8%. These figures can influence how the current balance between risk and potential reward is perceived.
• Recent coverage has highlighted TE Connectivity's role as a key supplier across electronics and connectivity markets, which helps explain why the stock has delivered returns of 66.6% over 5 years. At the same time, some investors are reassessing valuations across the tech sector more broadly, which may be contributing to shorter term share price weakness.
• Simply Wall St gives TE Connectivity a valuation score of 4 out of 6. The rest of this article explains what that score reflects using different valuation methods, and then outlines an approach to assessing value that brings these elements together more clearly for long term investors.

Approach 1: TE Connectivity Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a stock might be worth by projecting its future cash flows and then discounting those back to today in $ terms. For TE Connectivity, the model used is a 2 Stage Free Cash Flow to Equity approach.

The latest twelve month Free Cash Flow is about $3.49b. Analysts and extrapolated estimates point to projected Free Cash Flow of $4.24b by 2030, with a series of annual forecasts and extensions between 2026 and 2035. These longer term figures combine analyst inputs for the next few years with Simply Wall St extrapolations after that.

When those projected cash flows are discounted back to today, the DCF model produces an estimated intrinsic value of about $195.76 per share. Compared with the current share price of $205.11, the stock screens as roughly 4.8% above this intrinsic value, which is a small premium rather than a major gap.

Result: ABOUT RIGHT

TE Connectivity is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Approach 2: TE Connectivity Price vs Earnings

For a profitable company, the P/E ratio is a straightforward way to gauge how much you are paying for each dollar of earnings. This makes it a useful cross check against the cash flow based view from the DCF model.

What counts as a “normal” P/E partly reflects how quickly earnings are expected to grow and how risky those earnings are. Higher expected growth and lower perceived risk can support a higher multiple, while slower growth or higher uncertainty usually call for a lower one.

TE Connectivity currently trades on a P/E of 20.6x. That sits below the Electronic industry average of about 30.6x and well below the peer average of about 63.6x. Simply Wall St also calculates a “Fair Ratio” of 31.6x, which is the P/E it would expect for TE Connectivity after factoring in earnings growth characteristics, industry, profit margins, market cap and company specific risks.

This Fair Ratio is more tailored than a simple comparison with peers or the broad industry because it tries to match the multiple to the company’s own profile rather than to averages that may include very different businesses.

Since TE Connectivity’s actual P/E of 20.6x is below the Fair Ratio of 31.6x, the stock screens as undervalued on this metric.

Result: UNDERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 19 top founder-led companies.

Upgrade Your Decision Making: Choose your TE Connectivity Narrative

Earlier it was mentioned that there is an even better way to think about valuation, and on Simply Wall St this comes through Narratives, where you set out a clear story for TE Connectivity, link that story to assumptions for future revenue, earnings and margins, and the platform turns it into a forecast and Fair Value that updates as new news or earnings arrive so you can easily compare your Fair Value with the current price.

These Narratives sit inside the Community page and are designed to be quick to use. You can adjust a few key assumptions, see the implied Fair Value instantly, and decide whether the gap to the market price looks large enough to act on, without needing to build your own spreadsheet model.

For TE Connectivity, one investor might align with the more cautious Fair Value of US$220.00 that assumes revenue of US$22.5b, earnings of US$4.1b and a future P/E of 19.6x. Another might lean toward a more optimistic Fair Value of about US$339.56 that assumes revenue of US$24.1b, earnings of US$4.3b and a future P/E of 29.1x. Narratives let you see exactly which set of beliefs you are closer to and how that translates into your own valuation.

Do you think there's more to the story for TE Connectivity? 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.