Is TE Connectivity Overvalued Amid Strong Performance and Sector Tailwinds?

The question of whether TE Connectivity (TEL) is overvalued despite its robust financial performance and favorable sector dynamics hinges on a nuanced analysis of its valuation metrics, growth trajectory, and industry benchmarks. As the industrial and electronics components sector grapples with shifting demand and technological disruption, TEL's recent results-marked by record revenue and earnings-demand scrutiny to assess whether its current valuation reflects sustainable growth or speculative excess.

Strong Financial Performance and Sector Tailwinds

TE Connectivity's Q4 2025 results underscore its resilience and adaptability. The company reported non-GAAP earnings per share (EPS) of $2.44, surpassing estimates by $0.15, and revenue of $4.75 billion, a 15.9% year-over-year increase according to earnings data. This performance aligns with broader sector trends, as the electronics and industrial components industry has seen a 7.44% cumulative net income growth over the trailing twelve months. Notably, TEL's order intake surged by 22% year-over-year to $4.7 billion, reflecting strong demand in both its Industrial and Transportation segments. Free cash flow for the full fiscal year reached $3.2 billion, further bolstering its financial flexibility.

The company's exposure to artificial intelligence (AI) is another critical growth driver. AI-related revenue tripled to $900 million in fiscal 2025, signaling its potential to benefit from long-term technological shifts. This aligns with industry-wide tailwinds, as AI adoption accelerates across manufacturing, automotive, and telecommunications.

Valuation Metrics: A Mixed Picture

Despite these positives, TEL's valuation appears stretched relative to historical and sector benchmarks. As of November 2025, its price-to-earnings (P/E) ratio ranged between 34.82 and 37.59 depending on the source, significantly higher than its 10-year historical average of 27.66 according to data and the sector's average P/E of 38.79 as reported. While the latter suggests TEL is in line with industry peers, the former raises concerns about overvaluation.

The price-to-earnings-to-growth (PEG) ratio offers further insight. The electronics components sector's average PEG ratio of 0.90 in 2025 indicates that the industry is undervalued relative to its earnings growth expectations. For TEL, assuming a P/E of 35 and a trailing twelve months (TTM) EPS growth rate of 16% (based on its 2025 performance), its PEG ratio would approximate 2.2, far exceeding the 1.0 threshold typically used to assess fair valuation. This discrepancy suggests that TEL's current valuation may not fully justify its growth prospects, particularly when compared to the sector's more favorable PEG ratio.

Growth Sustainability and Risks

The sustainability of TEL's growth depends on its ability to capitalize on AI-driven demand and maintain operational efficiency. Its 6% organic revenue growth in 2025, driven by the Industrial segment, highlights its competitive positioning. However, the company's historical performance-beating EPS estimates 100% of the time over the past two years but only 63% for revenue-reveals inconsistencies in revenue predictability. This volatility could deter investors seeking stable cash flows.

Moreover, TEL's valuation multiples, while elevated, must be contextualized within the sector's broader re-rating. The electronics components industry's P/E of 38.79 reflects optimism about long-term earnings potential, suggesting that TEL's premium is not entirely out of step with market sentiment. Yet, the absence of a clear catalyst for sustained earnings acceleration beyond AI adoption-such as margin expansion or geographic diversification-raises questions about the durability of its current valuation.

Conclusion: A Cautionary Verdict

TE Connectivity's strong performance and strategic positioning in AI-driven markets are undeniably compelling. However, its valuation metrics-particularly the PEG ratio-indicate that the stock may be overvalued relative to its growth trajectory. While sector tailwinds provide some justification for its premium, investors must weigh the risks of overpaying for future earnings against the company's demonstrated operational strength. For TEL to justify its current valuation, it must deliver consistent revenue growth, maintain margin resilience, and demonstrate that its AI-related opportunities translate into scalable, long-term profits. Until then, the line between justified optimism and speculative excess remains perilously thin.