Should You Buy It? Check Tarnished Teradyne

The analyst also pointed out that the stock is currently trading at 1.5 times EBITDA/sales, which has usually been a trough valuation over the past decade.

In the meantime, Teradyne has a solid balance sheet that can withstand any short-term downturn in its core business. At the end of the third quarter, the company had $748 million ($4 a share) of cash and investments on the balance sheet and no debt.

Teradyne said in its earnings release that it completed its existing $400 million stock-buyback program, repurchasing some 27.9 million shares over the past year. Still, with that much cash just sitting on the balance sheet, I would not be surprised to see management announce a new buyback program at the stock's depressed levels some time in 2008.

Given the full picture, I do believe that Teradyne is attractive to purchase at current levels. The stock is already trading at a historically low valuation, and based on its peers' expected spending budgets, the company should see its orders begin to pick up in the first half of 2008.

Backed by a pristine balance sheet and the potential for more share-repurchase support, Teradyne can trade back up toward the midteens over the coming quarters.