TELEDYNE TECHNOLOGIES INC (NYSE:TDY) – A Quality Stock with Strong Fundamentals

TELEDYNE TECHNOLOGIES INC (NYSE:TDY) was identified through our Caviar Cruise screen, which focuses on high-quality companies with strong financials and sustainable growth. TDY stands out due to its profitability, efficient capital allocation, and solid cash flow generation. Below, we examine why this stock may appeal to quality investors.

Key Strengths of TDY

• High Return on Invested Capital (ROIC): TDY’s ROIC (excluding cash and goodwill) is 38.38%, well above the 15% threshold required by the Caviar Cruise screen. This indicates efficient use of capital to generate profits.
• Strong EBIT Growth: The company has delivered a 16.2% annual EBIT growth over the past five years, demonstrating improving operational efficiency.
• Healthy Debt Management: With a Debt-to-Free Cash Flow ratio of 2.8, TDY can repay its debt in under three years using current cash flows, reflecting financial stability.
• Profit Quality: TDY’s five-year average Profit Quality (FCF/Net Income) is 113%, meaning it converts net income into free cash flow effectively—a sign of earnings reliability.

Fundamental Analysis Summary

Our fundamental report rates TDY 5 out of 10, balancing strong profitability with some valuation concerns. Key takeaways:

• Profitability (7/10): High margins (Operating Margin: 18.49%, Profit Margin: 14.37%) and consistent earnings growth.
• Financial Health (5/10): Manageable debt levels but ROIC currently below cost of capital.
• Valuation (3/10): P/E of 24.6 suggests a premium price, though growth prospects may justify it.
• Growth (4/10): Past revenue growth (12.38% CAGR) is solid, but future growth expectations are moderate (5.97%).

For investors seeking durable businesses with strong cash flows and disciplined capital allocation, TDY presents a compelling case.

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Disclaimer
This is not investing advice! The article highlights observations at the time of writing, but you should conduct your own analysis before making investment decisions.