TE Connectivity Ltd (TEL)

Conclusion

TE Connectivity designs and manufactures connectivity and sensor products, sold through its Transportation Solutions and Industrial Solutions segments. On 9 November 2026 the shares closed at 218.75 USD, giving a market capitalisation of 62.89 billion USD.

The verdict is fair. The P/E of 19.3 sits slightly below its ten-year median of 20.0, a premium of -3.3%, and EV/EBITDA of 12.7 is below its median of 13.7, a premium of -7.5%. Price to book of 4.6 is above its median of 3.8, a premium of 21.9%. The discounted cash flow gives 170.54 USD per share at a discount rate of 10.6%. The fair value band runs from 158.70 to 238.05 USD with a midpoint of 198.37 USD, a margin of safety of -9.3% at the current price. The reverse DCF implies growth of 8.6% a year, against revenue growth of 5.9% over five years and free cash flow per share growth of 14.2%.

Several numbers support the case: an operating margin of 20.1%, ROIC of 19.2% against a WACC of 10.1%, free cash flow conversion of 104.6%, and an Altman Z-score of 5.14. The weakest are the growth gap, with 8.6% implied against 5.9% delivered, the price to book premium of 21.9% over its median, and the DCF value of 170.54 USD sitting well below the price. If revenue growth stays near its five-year rate, the price would need the margin and cash flow strength to carry the gap.

Financial health

The financial strength is green, held up by a current ratio of 1.73, net debt to EBITDA of 0.75 and interest coverage of 32.9, each assessed good. The quick ratio is 1.03 and debt to equity is 0.42. The Altman Z-score is 5.14, in the safe zone; the Altman model was designed for manufacturers, and this company is one. Insolvency risk is low, about 0.1% by the estimate of the Ohlson model over one to two years. Debt has fallen slightly over five years, with debt against revenue growth at -3.0%.

Earnings quality

Earnings quality is green, supported by free cash flow conversion of 104.6% over the last twelve months and 107.0% over five years, and by a negative accrual ratio of -4.9%. Stock-based compensation is 0.8% of revenue, leaving free cash flow after it at 3.24 billion USD. The share count has fallen at a five-year compound rate of 2.5%, which reflects buybacks. The Piotroski score is 8 out of 8. The Beneish M-score reading is not available. The company beat earnings estimates in all 8 of the last quarters, with an average surprise of 4.9%. Analysts raised the current-year estimate by 5.6% over 90 days, with 10 upward revisions and no downward ones in the last 30 days.

Profitability

Profitability is green. The gross margin of 36.2% is above its ten-year median of 31.9%, the operating margin of 20.1% is above 17.5%, and the net margin of 16.4% is above 14.6%. Operating margin stability is 8.3%. ROIC of 19.2% is above the WACC of 10.1%, with ROIC minus WACC at 9.1%, and the five-year median ROIC is 15.1%. The DuPont split shows a net margin of 16.4%, asset turnover of 0.75 and an equity multiplier of 1.97. Return on equity of 24.0% therefore comes mainly from margins, with leverage playing a modest part.

Growth

Growth is green. Revenue compounds at 7.4% over three years, 5.9% over five years and 5.0% over ten years. Earnings per share compound at 22.5% over three years, 10.3% over five years and 7.5% over ten years, and analysts expect next-year earnings per share to grow 11.5%. Revenue grew in 6 of the last 10 years. Revenue growth is the slowest part of the picture, while earnings growth has run ahead of it, partly because of the share count reduction.

Valuation

Valuation is yellow, with the verdict fair. The P/E of 19.3 and EV/EBITDA of 12.7 are below their ten-year medians, while price to sales (premium 15.5%) and price to book (premium 21.9%) are above them. The discounted cash flow gives 170.54 USD per share at a discount rate of 10.6%, with a terminal value making up 48.7% of it. The fair value from historical multiples is 226.21 USD. The fair value band runs from 158.70 to 238.05 USD, a margin of safety of -9.3% at 218.75 USD. The reverse DCF implies growth of 8.6% against revenue growth of 5.9%. The dividend yield is 1.4%, with a forward yield of 1.5% and a payout of 25.5% of free cash flow. The fair value is an estimate built on fixed assumptions, a 5% equity risk premium and capped growth, not a price target.

Risks

The main risk is growth falling short of the 8.6% a year that the price implies. Revenue growth of 5.9% over five years would leave the valuation resting on margins and cash flow. A fall in operating margin from 20.1% toward its ten-year median of 17.5% would narrow the return spread over WACC, which is 9.1% today. The price to book premium of 21.9% means the stock already trades above its usual book multiple. Because the DCF rests on the terminal value for 48.7% of its total, small changes in the long-run growth or discount rate assumptions would move the result. The Beneish M-score reading is not available. The analysis does not include a debt maturity schedule or revenue by segment, so the timing of debt repayments and the sources of growth cannot be checked.