Teledyne has had an impressive run over the past six months as its shares have beaten the S&P 500 by 14.6%. The stock now trades at $469, marking a 22.5% gain. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.

Is now the time to buy Teledyne, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Despite the momentum, we're swiping left on Teledyne for now. Here are three reasons why there are better opportunities than TDY and a stock we'd rather own.

Why Is Teledyne Not Exciting?

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.

1. Lackluster Revenue Growth

Long-term growth is the most important, but within industrials, a stretched historical view may miss new industry trends or demand cycles. Teledyne’s recent history shows its demand slowed significantly as its annualized revenue growth of 1.6% over the last two years is well below its five-year trend.

2. Core Business Falling Behind as Demand Plateaus

Investors interested in Inspection Instruments companies should track organic revenue in addition to reported revenue. This metric gives visibility into Teledyne’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.

Over the last two years, Teledyne failed to grow its organic revenue. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests Teledyne might have to lean into acquisitions to accelerate growth, which isn’t ideal because M&A can be expensive and risky (integrations often disrupt focus).

3. Previous Growth Initiatives Haven’t Paid Off Yet

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).

Teledyne historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 7.6%, somewhat low compared to the best industrials companies that consistently pump out 20%+.

Final Judgment

Teledyne isn’t a terrible business, but it doesn’t pass our bar. With its shares outperforming the market lately, the stock trades at 22.3× forward price-to-earnings (or $469 per share). This multiple tells us a lot of good news is priced in - we think there are better investment opportunities out there. Let us point you toward Cloudflare, one of our top software picks that could be a home run with edge computing.

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