Teradyne (TER) delivers high-quality technologies—such as smart gadgets, life-saving medical equipment, and data storage systems—to market faster. Its innovative test solutions for semiconductors, electronic systems, wireless devices, and other items ensure that products function as designed. Furthermore, its industrial automation services include collaborative and transportable robots that assist companies of all sizes in increasing production and lowering costs. TER is headquartered in North Reading, Mass.

Though the company reported strong earnings in its last reported quarter, it lowered its guidance for fiscal 2022, raising investors' concerns. TER anticipates weaker System-on-a-Chip test demand due to a delayed technological shift in one of its major end markets before growing again during the ramp of 3nm production in 2023.

TER’s shares declined 20.3% in price over the past three months and 32.7% over the past month. Closing yesterday's trading session at $ 111.86, the stock is currently trading 33.8% below its 52-week high of $168.91. In addition, it is trading below its $151.53 and $131.73 respective 50-day and 200-day moving averages, indicating a downtrend.

Click here to checkout our Semiconductor Industry Report for 2022

Here is what could shape TER's performance in the near term:

Strong Profitability

TER's 27.6% net income margin is 316.4% higher than the 6.6% industry average. Also, its gross profit margin, ROA, and ROC are 19.2%, 585.2%, and 464.9% higher than their respective industry averages. And its $1.10 billion in cash from operations is 876.3% higher than the $112.47 million industry average.

Poor Growth Prospects

Analysts expect TER's EPS to decline 20.7% in the current quarter (ending March 2022) and 44% in the next quarter (ending June 2022). Also, the company's sales growth is expected to remain negative in next quarter. In addition, TER's EPS is expected to decline 19.1% in price year-over-year in fiscal 2022 to $4.84.

POWR Ratings Reflect Uncertainty

TER has an overall C rating, which equates to Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. TER has a C grade for Growth. The company's poor growth prospects are consistent with this grade.

Among the 100 stocks in the A-rated Semiconductor & Wireless Chip industry, TER is ranked #62.

Beyond what I have stated above, one can view TER ratings for Value, Stability, Momentum, Sentiment, and Quality here.

Bottom Line

While the company possesses strong profitability and has exhibited impressive financial performance in its last reported quarter, its near-term growth prospects could raise investors' concerns. So, we think investors should wait for the company's prospects to stabilize before investing in the stock.

How Does Teradyne Inc. (TER) Stack Up Against its Peers?

While TER has an overall C rating, one might want to consider its industry peer, Semtech Corporation (SMTC), ChipMOS Technologies Inc. (IMOS), and Micron Technology Inc. (MU), which has an overall A (Strong Buy) rating.

Click here to checkout our Semiconductor Industry Report for 2022

TER shares fell $0.06 (-0.05%) in premarket trading Friday. Year-to-date, TER has declined -31.60%, versus a -5.97% rise in the benchmark S&P 500 index during the same period.

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.

More...