TE Connectivity plc manufactures connectivity and sensor solutions for industrial, automotive and communications end markets and presents a financially conservative profile with low leverage and historically strong profitability.
The company’s profitability metrics are notable: gross margin has remained in the low‑to‑mid 30% range (most recent gross margin 33.4%) and operating margin sits at 20.2%, reflecting persistent operational efficiency (Profit Margin Trends). Return on equity is elevated at 22.9%, underscoring strong shareholder returns over the reported periods (Return on Equity (ROE)).
TE also generates consistent operating cash flow, with trailing twelve‑month operating cash flow around $1.91B and a shift in investing cash flow to a positive $636.0M in the latest window, which together indicate recurring cash generation and a recent change in capital deployment (Strategic Capital Allocation).
The balance sheet shows conservative leverage (debt‑to‑equity 0.1190) and healthy near‑term liquidity (current ratio 1.5574).
At the same time there are clear signs of pressure on top‑line momentum and cash conversion. Revenue per share reversed from a 4.8% increase in the year ending 2014 to a −12.1% year‑over‑year change by 2015, with Rev/Share down from $37.70 to $33.15 over that interval (EPS Diluted & Revenue per Share; Revenue & EPS Growth). Operating cash flow has also edged lower from about $2.08B to $1.91B in the periods shown, and quarterly net income displays volatility (recent quarterly net income of $839.0M versus other quarters nearer $351.0M), suggesting earnings and cash can be lumpy across cycles (Revenue & Net Income; Strategic Capital Allocation).
Key fundamentals to watch going forward include sequential changes in revenue per share and one‑year revenue growth (most recent Rev/Share YoY −12.1%), trends in operating cash flow and free cash flow conversion of the ~$1.9B OCF TTM, stability of operating margin around 20.2%, and whether ROE remains near the recent 22.9% level; also monitor financing cash flow given recent outflows (−$1.89B) and the trailing PE which has been near 9.3x in recent readings (Price-to-Earnings (PE) Ratio Trend; Earnings Quality Analysis; Strategic Capital Allocation).
The foundation of business quality and long-term value creation
TE Connectivity plc's quarterly revenue in the dataset centers around the low-to-mid $3 billion range for many periods, with the most recent reported revenue at $2.95B for the period ending 2016-03-25. The chart shows several larger revenue observations (for example $9.83B in 2013-09-27, $6.90B in 2014-09-26 and $9.12B in 2015-09-25) amid a series of more typical quarterly values near $2.5B—$3.7B, indicating occasional large spikes relative to the prevailing quarterly range.
Net income has been variable across the history shown, with a loss of \$74.0M in 2009 and prominent peaks such as \$916.0M on 2012-09-28. Net income in the most recent quarter reported (period ending 2016-06-24) was $839.0M, which is materially above several intervening quarters (for example $351.0M on 2015-06-26 and $335.0M on 2013-06-28). The most recent quarterly revenue was $2.95B. The most recent quarterly net income was $839.0M.
Why Growth Matters
Consistent revenue and earnings growth are the lifeblood of successful long-term investments. Companies that can grow their top line (revenue) and bottom line (net income) over many years demonstrate they have products or services customers value and are willing to pay for repeatedly.
Revenue Growth shows whether the company is expanding its market reach, gaining market share, or successfully launching new products.Net Income Growth demonstrates the company can convert that revenue into actual profits while managing costs effectively.
Look for steady, sustainable growth rather than erratic spikes. The best businesses compound earnings year after year, creating tremendous value for shareholders over time. Companies that can grow earnings faster than revenue are improving their profitability—a sign of operational excellence and competitive strength.
Year-over-year growth rates for revenue and earnings per share
Reading the Growth Rate Chart
This chart converts the absolute per-share figures into year-over-year percentage changes, making it easy to see whether growth is accelerating, decelerating, or reverting to trend — regardless of the company's absolute size.
Revenue per Share Growth (1-year, split-adjusted) measures how quickly the top line is expanding on a per-share basis. Sustained positive growth signals that the company continues to win customers and grow its addressable market.EPS Diluted Growth (1-year, split-adjusted) measures how quickly earnings are compounding for each shareholder. When EPS growth consistently outpaces revenue growth, operating leverage and margin expansion are at work.
Look for consistency, not just magnitude. A company that reliably grows EPS 10–15% per year is far more valuable than one that alternates between 50% spikes and deep contractions. Negative EPS growth during a period of positive revenue growth is a red flag — costs are rising faster than sales. Quarters where both lines converge near zero or go negative deserve close scrutiny.
How revenue converts to net income for the most recent annual period
Over the period Sep 2014 to Sep 2015, Te Connectivity Plc converts approximately 33¢ of every revenue dollar into gross profit (gross margin: 33.4%).The waterfall below shows how revenue flows through various expense categories.
Period Information
Report Type: Annual (10-K)
Period: Sep 2014 to Sep 2015
Analyzing long-term margin stability and competitive positioning
TE Connectivity plc's gross margin has been broadly stable in the low-to-mid 30% range over the period shown, rising from 31.3% in 2010 to 32.6% in 2013 and peaking at 33.7% in 2014 before edging slightly lower to 33.4% in the most recent 2015 data point. The most notable inflection is the step up between 2010 and 2013–2014, with a small decline from 2014 to 2015.
Operating margin data are available for 2010 and 2014 and show an increase from 18.6% in 2010 to 20.2% in 2014, with 20.2% being the latest reported operating-margin figure. The most recent gross margin was 33.4%. The most recent operating margin was 20.2%.
Understanding Profit Margins
Between Sep 2014 and Sep 2015, Te Connectivity Plc converts every dollar of revenue through the following stages:
Sustainable competitive advantages reveal themselves through consistently superior profit margins over extended periods. Companies with durable economic moats maintain pricing power and operational efficiency that competitors struggle to match.
A sign of durable competitive advantage is earning sustained higher margins than competitors.Look for margins that remain stable or improve over time, especially during economic downturns. Declining margins may signal increasing competition, pricing pressure, or deteriorating business fundamentals.
Comparing reported earnings to actual cash generation
TE Connectivity plc’s trailing‑12‑month operating cash flow shows a modest downshift in the most recent data: operating cash flow fell from roughly $2.08B at the 2014-09-26 period to $1.91B at the 2015-09-25 period, after earlier levels near $2.05B in 2013. The data series for operating cash flow therefore indicates a peak around 2013–2014 and a decline into the latest quarter provided.
Trailing net income in the dataset is available only through mid‑2013 and shows an increase from $1.11B (period ending 2012-09-28) to $1.67B (2013-03-29) and then to $1.80B (2013-06-28). Comparing the latest available points in each series, the most recent Operating Cash Flow (TTM) observed was $1.91B (period ending 2015-09-25) and the most recent Net Income (TTM) observed was $1.80B (period ending 2013-06-28).
The Earnings vs. Cash Flow Gap
Reported earnings (Net Income) doesn't always reflect actual cash generation. Companies use accrual accounting, which recognizes revenue when earned and expenses when incurred—not when cash actually changes hands. This creates timing differences and opportunities for accounting discretion that can mask underlying business health.
Net Income (the "earnings" number) can be influenced by non-cash items like depreciation, stock-based compensation, and changes in accounting estimates.Operating Cash Flow, however, shows the actual cash the business generates from its core operations—a harder number to manipulate.
Trailing Twelve Months
What to Look For
Key Insight: Companies with durable competitive advantages typically show operating cash flow that meets or exceeds net income over time, demonstrating they convert accounting profits into actual cash that can be returned to shareholders or reinvested in the business.
Measuring management's efficiency at generating profits from shareholder capital
TE Connectivity plc's trailing twelve-month Return on Equity rose over the three reported quarters. ROE increased from 14.0% at period end to 21.6% at , then to 22.9% at . The main inflection occurred between and , when ROE climbed about 7.6 percentage points, followed by a smaller increase of 1.3 percentage points into the most recent quarter.
The latest reported ROE is elevated relative to the earlier quarter. The most recent trailing twelve-month Return on Equity was 22.9% as of .
The Gold Standard of Profitability
Return on Equity (ROE) is a powerful measure of how effectively a company's management is using the money shareholders have invested. Calculated by dividing Net Income by Shareholders' Equity, it reveals how much profit is generated for every dollar of equity capital.
A consistently high ROE (typically above 15-20%) is often the signature of a "quality" business with a durable competitive advantage. It indicates that the company can generate high returns on its own capital, which it can then reinvest at these high rates to compound value over time.
What to Look For:
How the company generates and deploys its cash
TE Connectivity plc's trailing‑twelve‑month cash flows show persistent operating cash generation around the low‑$2B range in the periods shown, with operating cash declining from $2.08B (period end 2014‑09‑26) to $1.91B (period end 2015‑09‑25). Investing cash flows move from negative in earlier years (e.g., −$545M at 2013‑09‑27) to a positive inflow of $636.0M at the most recent investing observation (period end 2015‑09‑25). Financing cash flows in the most recent quarters reflect sizeable net outflows, peaking at −$3.03B (period end 2016‑09‑30) and easing to −$1.89B by period end 2016‑12‑30.
Notable inflection points in the series include the shift of investing cash from negative to positive between 2013 and 2015 and the gradual decline in operating cash from about $2.08B to $1.91B over 2014–2015. Financing outflows were largest in the 2016‑09‑30 TTM and less negative in the 2016‑12‑30 TTM. The latest reported TTM values are: Operating Cash Flow TTM $1.91B (period end 2015‑09‑25); Investing Cash Flow TTM $636.0M (period end 2015‑09‑25); Financing Cash Flow TTM −$1.89B (period end 2016‑12‑30).
Understanding Company Strategy
Capital allocation refers to how management decides to spend and invest the company's cash. Analyzing the three primary categories of cash flow reveals a company's true operational strategy:
What to look for: Is the company bootstrapping (funding growth solely from operating cash)? Are they borrowing to fund aggressive expansion or dividends? Or are they capital raising by issuing new shares, potentially diluting your ownership? A healthy, mature company typically generates strong operating cash, moderately invests in growth, and returns the surplus to shareholders through financing activities.
Trailing Twelve Months
Net assets attributable to each share — the accounting floor of intrinsic value
Why Book Value per Share Matters
Book value per share is the net worth of the company — total assets minus total liabilities — divided by shares outstanding (split-adjusted). It represents the theoretical liquidation value per share if every asset were sold and every liability repaid at balance-sheet carrying values. It is the accounting foundation upon which much of equity valuation is built.
A steadily rising book value per share is one of the most reliable signals of compounding wealth creation. It means the company is retaining earnings and building net worth faster than it is returning capital or eroding it. Warren Buffett famously tracked Berkshire Hathaway's book value per share for decades as his primary measure of intrinsic value growth.
Context is essential. Asset-heavy businesses (banks, manufacturers, utilities) should be judged by book value more directly than asset-light businesses (software, consumer brands), where intangible assets like intellectual property and customer loyalty may far exceed their balance-sheet carrying values. A company trading at a large premium to book value is not necessarily overvalued — it may simply possess competitive advantages that accounting rules do not capture. Conversely, a declining book value per share — especially over multiple years — is a serious warning sign of capital destruction.
How much of the company is financed by debt versus shareholders' equity
Reading the Debt-to-Equity Ratio
The debt-to-equity (D/E) ratio compares total financial debt to shareholders' equity. A ratio of 1.0 means the company has borrowed one dollar for every dollar of equity; a ratio of 2.0 means it has borrowed twice as much as it owns. Financial leverage amplifies both returns and risk: in good times, debt turbocharges equity returns; in bad times, it accelerates losses and can threaten solvency.
Trends matter more than a single number. A rising D/E ratio can mean the company is taking on debt to fund growth — potentially value-creating if returns exceed the cost of capital. But it can also mean equity is being eroded through losses or that the business is borrowing simply to sustain operations. A falling D/E ratio generally reflects strengthening financial health: earnings are being retained, debt maturities are being paid down, or both.
Industry norms vary enormously. Capital-intensive sectors (utilities, real estate, financials) routinely carry high D/E ratios that would be alarming in, say, a technology company. Always compare against sector peers. As a rough rule of thumb, a D/E above 2× in a cyclical business warrants careful scrutiny of interest coverage and refinancing risk.
Short-term liquidity — can the company cover its near-term obligations?
Liquidity: Can the Business Pay Its Bills?
The current ratio is calculated as current assets divided by current liabilities. A ratio of 1.5 means the company has $1.50 of short-term assets — cash, receivables, inventory — for every $1.00 of obligations due within the next twelve months. It is the most direct measure of near-term financial resilience: can the business meet its obligations without needing to raise new capital or sell long-term assets at a discount?
A ratio above 1.0 is generally healthy, meaning current assets exceed current liabilities. A ratio consistently above 2.0 may indicate the company is holding excess cash or inventory that could be deployed more productively. A ratio below 1.0 is a warning sign — the company is relying on future cash generation or external financing to cover its near-term obligations, which is manageable in normal conditions but dangerous during a downturn.
Trends and context matter.A declining current ratio isn't always alarming — highly efficient businesses (e.g., large retailers with reliable daily cash flows) often run leaner balance sheets intentionally. Conversely, a rapidly rising current ratio can signal slowing sales causing inventory to build, or customers taking longer to pay. Always compare the trend against industry peers and cross-reference with the cash flow statement to assess whether the business is genuinely liquid or just holding non-cash current assets.
How much the market is paying for each dollar of company earnings
TE Connectivity plc's trailing twelve-month price-to-earnings ratio has moved lower over the three periods shown, falling from 11.3x (period ended 2012-09-28) to about 9.2x in the subsequent quarter and then holding near that level. The most recent two quarters show relative stabilization rather than further decline, with a slight uptick in the latest quarter.
The primary inflection occurs between the 2012-09-28 reading (11.3x) and the 2013-03-29 reading (9.2x), after which the ratio levels near 9x. The most recent Price-to-Earnings (PE) ratio was 9.3x as of 2013-06-28.
What Is the PE Ratio?
The Price-to-Earnings (PE) ratio is one of the most widely used valuation metrics in investing. It divides the current stock price by the company's earnings per share (EPS), revealing how much investors are willing to pay for each dollar of earnings. A high PE can signal that the market expects strong future growth, while a low PE may suggest undervaluation—or reflect genuine concerns about the company's prospects.
Context matters:PE ratios vary significantly across industries. High-growth technology companies routinely trade at PE ratios above 30x or 40x, while mature, low-growth sectors like utilities or financials often trade closer to 10–15x. Always compare a company's PE to its own history and its industry peers, not just an absolute number.
What to Look For:
Key Insight:The PE ratio is a snapshot of market sentiment and expectations. Tracking it over time alongside earnings trends reveals whether the market's valuation has expanded or contracted—and whether that change is justified by fundamentals.