Keysight Technologies Inc (KEYS)

Conclusion

Keysight Technologies designs and sells electronic design and test solutions, including oscilloscopes, analyzers, network test equipment and simulation software, for communications, semiconductor, aerospace and defense customers. At 288.97 USD on 2026-11-09, the market capitalisation is 49.2 billion USD.

The verdict is overvalued. The company trades at a P/E of 39.2x, close to its ten-year median of 39.4x, but its EV/EBITDA of 28.8x sits 38.6% above a ten-year median of 20.8x. The DCF gives 111.23 USD per share at a discount rate of 10.9%. The fair value band runs from 136.67 to 205.01 USD with a midpoint of 170.84 USD, a margin of safety of -40.9% at the current price. The fair value from historical multiples is 230.45 USD. The reverse DCF implies 18.9% annual growth, while revenue grew 5.0% a year over five years.

What supports the case is the balance sheet and returns. Net debt to EBITDA is 0.08, interest coverage is 13.6x, and ROIC is 17.6% against a WACC of 10.6%. Free cash flow conversion over the trailing twelve months is 117.0%. What would break it is the gap between the price and the cash flows. Revenue fell 0.3% a year over three years, the DCF is well below the price, and the EV/EBITDA premium is large.

Financial health

Financial strength is green, supported by a current ratio of 2.02, a quick ratio of 1.41, net debt to EBITDA of 0.08 and interest coverage of 13.6x. Debt to equity is 0.42, so leverage is modest. The Altman Z-score is 7.7, in the safe zone. Insolvency risk is low, about 0.2% by the estimate of the Ohlson model over one to two years, based on financial statements as of 2025-10-31. Liquidity and debt service do not look like a near-term concern. The company does not report a debt maturity schedule in this data, so refinancing timing cannot be checked.

Earnings quality

Earnings quality is green. Free cash flow conversion is 117.0% on a trailing basis and 121.2% over five years, and the accrual ratio is -5.5%, which means cash earnings exceed reported earnings. Stock-based compensation is 3.3% of revenue, and free cash flow after it is 1.26 billion USD. The share count fell 1.8% a year over five years, so buybacks are reducing dilution. The Piotroski score is 5 out of 9 across the evaluable tests. The Beneish M-score is -2.70, a reading the model labels unlikely to indicate manipulation. The company beat earnings estimates in all 8 of the last quarters, with an average surprise of 10.6%. Analysts raised current-year estimates by 12.3% over 90 days and next-year estimates by 16.9%, with next-year earnings growth at 21.2%.

Profitability

Profitability is green. The gross margin is 64.7% against a ten-year median of 61.1%, the operating margin is 20.3% against 17.2%, and the net margin is 19.1% against 14.6%. Return on invested capital is 17.6%, against a WACC of 10.6%, and the company's own assessment is that it creates value. Five-year median ROIC is 21.8%, so returns have eased from that level. The DuPont split for fiscal 2025 shows a net margin of 15.7%, an asset turnover of 0.48 and an equity multiplier of 1.92. Return on equity of 19.1% therefore comes mainly from margins and only partly from leverage.

Growth

Growth is green on the strength of earnings, though revenue growth is weak. Revenue compounded at -0.3% over three years, 5.0% over five years and 6.5% over ten years. Earnings per share fell 7.5% a year over three years but rose 8.1% over five and 5.0% over ten. Free cash flow per share grew 12.0% a year over three years, 9.3% over five and 16.1% over ten. Revenue grew in 8 of the last 10 years. The reverse DCF implies 18.9% growth, well above the five-year revenue record, so the price depends on a sharp acceleration.

Valuation

Valuation is red. Current multiples against their ten-year medians are: P/E 39.2x against 39.4x (a premium of -0.6%), EV/EBITDA 28.8x against 20.8x (38.6%), price to free cash flow 33.5x against 27.1x (23.5%), price to sales 7.5x against 5.4x (38.8%), and price to book 7.5x against 6.0x (25.4%). The DCF gives 111.23 USD per share at a discount rate of 10.9% with 2.5% terminal growth. The fair value band runs from 136.67 to 205.01 USD with a midpoint of 170.84 USD, a margin of safety of -40.9% at 288.97 USD. The fair value from historical multiples is 230.45 USD. The fair value is an order of magnitude built on fixed assumptions, a 5% equity risk premium and capped growth, not a price target. The company pays no dividend, so the forward yield is 0%.

Risks

The main risk is valuation. If the premium on EV/EBITDA, price to sales and price to free cash flow narrows toward the ten-year medians, the share price would have to fall materially for the multiples to return to those levels. Weak revenue growth is the second risk: three-year revenue growth of -0.3% means the reverse DCF's 18.9% growth assumption must be met for the current price to hold. A slowdown in earnings estimates would also weigh on the forward P/E. The DCF rests on a terminal value that accounts for 47.8% of its value, so its result is sensitive to the discount rate and long-term growth. The company's beta is 1.21, so the share price may move more than the market. This analysis does not include a debt maturity schedule or revenue by segment, so refinancing exposure and the mix of growth across the two segments cannot be assessed.