Amphenol (APH)

Total return at 5 years: 11.2%/year = 10.5% appreciation + 0.7% dividend. The target price ($142) is ex-dividend; the $4 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $105 · Multiples $117) exceeds the market price ($86).

Today — fairly valued: at $86 trades ~26.4% below its value discounted to today (~$117); the discount is positive but does not reach the margin of safety we require (≥38%).

At 5 years — Infravalorado: the target price ($142) plus dividends yield above the required average return (10%) — the business compounds.

The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$73.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($86) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (15.4%/year) than we project (20.0%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$11.1 bn of owner earnings in year 5 (vs ~$13.5 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). Cash accumulates the retained surplus —what is not returned as dividend or buyback—, so that EV falls and multiples compress going forward. The valuation is done on EV/EBIT. In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Amphenol is valued on EV/EBIT over the consolidated business (industrial archetype): it is a single business —three segments of the same operating nature (manufacture and sale of connectors, interconnect, cable and sensors)—, with no financial piece that would warrant treating it as a sum of the parts with different metrics (unlike a lender or a captive bank). Year 0 is the TTM ended 30-Jun-2026 (US$29,012 million of revenue, +54.2% year over year), and the growth path decelerates from that level —half organic on AI demand in data centers, half from the Andrew (2025) and CommScope (January 2026) acquisitions as they lap their comparison base— toward a durable ~10% in year 5, within the band of a quality compounder with a reinvestment runway. The TTM operating margin of 27.0% (versus 20.7% in FY2024) reflects genuine operating leverage and mix shift toward the Communications Solutions segment, with a non-recurring component (a US$80 million tariff recovery in the second quarter of 2026) that is normalized in the projection. Invested capital for the return on capital (~20.9%) comes from the real balance sheet at 30-Jun-2026 (equity of US$15,613 million + total debt of US$18,811 million − cash and equivalents of US$5,419 million), using the current portion of long-term debt from the July 2026 8-K (US$1,634 million) instead of the XBRL short-term debt tag, which the company stopped using and which is frozen at a 2018 value. Cash accumulates (there is no material net buyback: diluted shares grew from 2,484 to 2,578 million between 2022 and the second quarter of 2026, on a post-split basis, dilution from stock-based compensation barely offset by buybacks) and FCF retention is anchored to today's real flows (TTM FCF of US$4,714 million, TTM buybacks of US$710 million, TTM dividends of US$1,017 million).

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (EV falls as cash increases). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $142 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $86, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $142 in 5 years plus $4 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $117. Against the current market price ($86), the margin of safety is 26.4% (trades below the maximum → there is margin) and the total return at that price would be 11.2% annually.

• Entry multiple. Trades near the upper half of the industrial archetype band, reflecting that the market already recognizes much of the business's quality.
• 5-year expected return. The base case implies a +11% annual return, within the range of a good investment but without the wide margin of a missing-buyers or motivated-sellers opportunity.
• Sensitivity to the terminal multiple. The 5-year value is sensitive to return on capital staying above the 10% bar as CommScope is integrated.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✓ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (93%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Return on capital. ~20.9% on the balance sheet's real invested capital, an exceptional band (10% bar), though carrying the goodwill from recent acquisitions.
• Cash generation. TTM FCF (OCF − capex) of $4,714 million, with solid conversion of operating income to cash.
• Reinvestment runway. A fragmented ~$500,000 million market with room to keep consolidating via M&A at attractive returns.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

Amphenol's driver is component volume by segment, not a single volume×price pair like a marketplace: each segment grows through a combination of end-market demand (particularly IT/datacom from AI), content gains from design-in, and acquisitions that are consolidated within the corresponding segment.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• TTM growth. +54.2% year over year, half organic (AI demand) and half from acquisitions that will lap their comparison over the coming quarters.
• Backlog. ~$8,900 million at the close of 2025 (vs ~$6,100 million in 2024) and a 1.23× book-to-bill in the second quarter of 2026.
• Reliance on a single engine. A large part of recent growth is concentrated in IT/datacom (AI); a slowdown in that end market would hit the consolidated figures hard.

• Demand recurrence. Connectors are an indispensable component in electronics, automotive, defense and data centers, with demand tied to long-term electrification and digitalization megatrends.
• Pricing power. Operating margin rose from 20.7% to 27.0% TTM, evidence of the ability to pass through costs and to shift mix toward higher-value-added products.
• Customer and market diversification. No customer accounted for ≥10% of sales in the last three fiscal years; seven distinct end markets cushion sector shocks.
• Geographic concentration in China. ~16% of sales and ~37% of long-lived assets in China, amid growing tariffs and export controls.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• !Leverage (net debt / EBITDA)Net debt / EBITDA 1.5x
• ✓Interest coverage (EBIT / interest)12.4x
• –Liquidity (current ratio)no data
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 93% of ROIC
• ✓Value creation (ROIC − 10% bar)+11pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 0.9x — no over-investment
• !Float / working capitalConsumes cash $0.7 bn (positive WC)
• ✓Dilution (SBC % of revenue + shares)SBC 0.5% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Leverage. Net debt/TTM EBITDA ≈1.4× after funding part of CommScope with new debt; manageable but rising relative to the company's track record.
• Liquidity. Cash and equivalents of $4,729 million plus $690 million in short-term investments amply cover the current portion of debt ($1,634 million).
• Debt data quality. The XBRL tag for short-term debt has been frozen since 2018; the July 2026 8-K balance sheet (Jun-30-2026) was used instead for the actual current portion.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• CEO tenure. R. Adam Norwitt has led the company since 2009, with a long and consistent track record of M&A execution.
• M&A track record. More than $14,000 million invested in acquisitions between 2025 and January 2026, with an upward revision of expected CommScope synergies.
• Transparency on integration risks. The 10-K explicitly acknowledges historical difficulties integrating large, complex acquisitions.

• The market's lack of immediate clarity on how much of the TTM operating margin (27.0%) is sustainable operating leverage versus one-time benefits (an $80 million tariff-recovery benefit in the second quarter of 2026)
• The debt jump from CommScope creates short-term uncertainty about the pace of deleveraging, which a longer-term investor can tolerate better
• The AI narrative has already pushed the share price up considerably, so the margin that remains is narrower than in a typical missing-buyers or motivated-sellers case

There is no classic source of discount (spin-off, cycle bottom, one-off sinking GAAP): the current price already reflects most of the business's quality. The margin that persists comes from the market not fully distinguishing between durable organic growth (AI, design-in) and inorganic growth that will eventually lap its comparison.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at -7%/year (-30% total): the margin of safety protects the downside. The bull (+18%/year, +131% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• CommScope integration. The largest acquisition in the company's history ($10,500 million), with goodwill impairment risk if performance does not keep pace.
• Financial interest. Projected net interest nearly doubles in 2026 (from $367.8 to ~$800.0 million), pressuring net margin in the short term.
• Tax dispute in China. A $100 million charge already recorded, with a disclosed potential exposure of up to ~$300 million and no resolution date.
• Regulatory restriction on defense contractors. A January 2026 executive order could limit buybacks and dividends if Amphenol were designated an underperforming defense contractor (a disclosed but unmaterialized risk).

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  A wide moat and ROIC 21% above the 10% bar, but the margin is limited (+26%) → excellent business at a fair price.

• Peter Lynch Growth at a reasonable price (GARP)

  A cyclical growing 20% at a multiple/growth of 1.5 → reasonable for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 3% (EBIT/EV) + ROIC 21% → falls outside the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts 15% vs our 20%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -8%/yr, bull-scenario ceiling +18%/yr over 5y: reasonable asymmetry, without an ample cushion.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, stable; sources: switching costs, efficient scale, intangibles, cost advantage → passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting 15%, within what we project (20%) — the story squares with the numbers.