Teledyne’s 24.4% return over the past six months has outpaced the S&P 500 by 17.8%, and its stock price has climbed to $672.92 per share. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.

Is it too late to buy TDY? Find out in our full research report, it’s free.

Why Does TDY Stock Spark Debate?

Playing a role in mapping the ocean floor as we know it today, Teledyne (NYSE: TDY) offers digital imaging and instrumentation products for various industries.

Two Things to Like:

1. Skyrocketing Revenue Shows Strong Momentum

A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Thankfully, Teledyne’s 14.7% annualized revenue growth over the last five years was exceptional. Its growth beat the average industrials company and shows its offerings resonate with customers.

2. Operating Margin Rising, Profits Up

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Looking at the trend in its profitability, Teledyne’s operating margin rose by 5.3 percentage points over the last five years, as its sales growth gave it immense operating leverage. Its operating margin for the trailing 12 months was 18.8%.

One Reason to be Careful:

Previous Growth Initiatives Haven’t Impressed

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although Teledyne has shown solid fundamentals lately, it historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 6.4%, somewhat low compared to the best industrials companies that consistently pump out 20%+.

Final Judgment

Teledyne’s merits more than compensate for its flaws, and with its shares beating the market recently, the stock trades at 28× forward P/E (or $672.92 per share). Is now a good time to buy? See for yourself in our full research report, it’s free.

Stocks We Like Even More Than Teledyne

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