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Texas Instruments

Nasdaq:TXN
Snowflake Description

Flawless balance sheet with solid track record and pays a dividend.

The Snowflake is generated from 30 checks in 5 different areas, read more below.
TXN
Nasdaq
$97B
Market Cap
  1. Semiconductors and Semiconductor Equipment
Company description

Texas Instruments Incorporated designs, manufactures, and sells semiconductors to electronics designers and manufacturers worldwide. More info.


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3 Month History
TXN
Industry
5yr Volatility vs Market
Competitors

Value

 Is Texas Instruments undervalued based on future cash flows and its price relative to the stock market?

Value is all about what a company is worth versus what price it is available for. If you went into a grocery store and all the bananas were on sale at half price, they could be considered undervalued.
INTRINSIC VALUE BASED ON FUTURE CASH FLOWS
Here we compare the current share price of Texas Instruments to its discounted cash flow analysis.value.

The discounted cash flow value is simply looking at what the company is worth today, based on estimates of how much money it is expected to make in the future.

How is this discounted cash flow calculated?

  • The current share price of Texas Instruments is above its future cash flow value.
Often investors are willing to pay a premium for a company that has a high dividend or the potential for future growth.
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for it. This is similar to the price of fruit (e.g. Mangoes or Avocados) increasing when they are out of season, or how much your home is worth.

The amount the stock market is willing to pay for Texas Instruments's earnings, growth and assets is considered below, and whether this is a fair price.
Price based on past earnings
Are Texas Instruments's earnings available for a low price, and how does this compare to other companies in the same industry?
  • Texas Instruments is good value based on earnings compared to the US Semiconductors and Semiconductor Equipment industry average.
  • Texas Instruments is overvalued based on earnings compared to the US market.
Price based on expected Growth
Does Texas Instruments's expected growth come at a high price?
  • Texas Instruments is poor value based on expected growth next year.
Price based on value of assets
What value do investors place on Texas Instruments's assets?
  • Texas Instruments is overvalued based on assets compared to the US Semiconductors and Semiconductor Equipment industry average.
X
Value checks
We assess Texas Instruments's value by looking at:
  1. Is the discounted cash flow value less than 20%, or 40% of the share price? (2 checks) ( Click here or on bar chart for details of DCF calculation. )
  2. Is the PE ratio less than the market average, and/ or less than the Semiconductors and Semiconductor Equipment industry average (and greater than 0)? (2 checks)
  3. Is the PEG ratio within a reasonable range (0 to 1)? (1 check)
  4. Is the PB ratio less than the Semiconductors and Semiconductor Equipment industry average (and greater than 0)? (1 check)
  5. Texas Instruments has a total score of 1/6, see the detailed checks below.

    Note: We use GAAP Earnings per Share in all our calculations including PE and PEG Ratio.
    Note 2: PEG ratio is based on analysts EPS growth expectations in 1 year (3.16%).

    Full details on the Value part of the Simply Wall St company analysis model.
X
Discounted cash flow (2 Stage Free Cash Flow to Equity)

The calculations below outline how an intrinsic value for Texas Instruments is arrived at by discounting future cash flows to their present value. We use analyst's estimates of cash flows going forward 5 years.

See our documentation to learn about this calculation.

5 year cash flow forecast

Present value of next 5 years cash flows:
$18,356

Terminal Value

Terminal Value = FCF2021 × (1 + g) ÷ (Discount Rate – g)

Terminal Value = $5,244 × (1 + 2.47%) ÷ (10.27% – 2.47%)

Terminal value based on the Perpetuity Method where growth (g) = 2.47%:
$68,867

Present value of terminal value:
$42,236

Equity Value

Equity Value (Total value) = Present value of next 5 years cash flows + terminal value
$60,592 = $18,356 + $42,236

Value = Total value / Shares Outstanding ($60,592 / 986)

Discount to Share Price

Value per share:
$61.48

Current discount (share price of $98.08): -59.53%



Estimate of Discount Rate

The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.

Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)

Discount rate = 10.27% = 2.47% + (1.036 * 7.53%)



Estimate of Bottom Up Beta

The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm). Note the market value of equity is used not the book value ($96,663,782,765).

Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))

1.036 = 1.01 (1 + (1- 30%) (3.71%))

Levered Beta used in calculation = 1.036



Assumptions
  1. The risk free rate of 2.47% is from the 10 year government bond rate in USD.
  2. The bottom-up beta is estimated by analysing other companies in the same industry.
  3. The Equity Risk Premium is calculated by subtracting the risk free rate from the market return premium (7.53%) (source: Buffet).
  4. The dividend discount model is automatically used for companies in the following industries: Banks, Insurance, Real Estate Investment Trusts (REITs), Diversified Financial Services and Capital Markets.

Future Performance

 How is Texas Instruments expected to perform in the next 1 to 3 years based on estimates from 29 analysts?

The future performance of a company is measured in the same way as past performance, by looking at estimated growth and how much profit it is expected to make.

Future estimates come from professional analysts. Just like forecasting the weather, they don’t always get it right!
Annual Growth Rate
3.4%
Expected annual growth in earnings.
Earnings growth vs Low Risk Savings
Is Texas Instruments expected to grow at an attractive rate?
  • Texas Instruments's earnings growth is positive but not above the low risk savings rate of 3.6%.
Growth vs Market Checks
  • Texas Instruments's earnings growth is positive but not above the US market average.
  • Texas Instruments's revenue growth is positive but not above the US market average.
Annual Growth Rates Comparison
Analysts growth expectations
Super high growth metrics
High Growth Checks
  • Texas Instruments's earnings are expected to grow by 3.4% yearly, however this is not considered high growth (20% yearly).
  • Texas Instruments's revenue is expected to grow by 3.6% yearly, however this is not considered high growth (20% yearly).
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can be gauged below. We look back 3 years and see if they were any good at predicting what actually occurred. We also show the highest and lowest estimates looking forward to see if there is a wide range.
Performance in 3 years
In the same way as past performance we look at the future estimated return (profit) compared to the available funds. We do this looking forward 3 years.
  • Texas Instruments is expected to perform strongly, Return on Equity (ROE) in 3 years is estimated to be above 20%.

Improvement & Relative to industry
  • Performance (ROE) is expected to be above the current US Semiconductors and Semiconductor Equipment industry average.
  • A decline in Texas Instruments's performance (ROE) is expected over the next 3 years.
X
Future performance checks
We assess Texas Instruments's future performance by looking at:
  1. Is the annual earnings growth rate expected to beat the low risk savings rate, plus a premium to keep pace with inflation?
  2. Is the annual earnings growth rate expected to beat the average growth rate in earnings of the US market? (1 check)
  3. Is the annual revenue growth rate expected to beat the average growth rate in revenue of the US market? (1 check)
  4. Is the annual earnings growth rate expected to be above 20%? (1 check)
  5. Is the annual revenue growth rate expected to be above 20%? (1 check)
  6. Is the Return on Equity in 3 years expected to be over 20%? (1 check)
Some of the above checks will fail if the company is expected to be loss making in the relevant year.
Texas Instruments has a total score of 1/6, see the detailed checks below.

Note 1: We use GAAP Net Income Excluding Exceptional Items for our Earnings in all our calculations.

Full details on the Future part of the Simply Wall St company analysis model.

Past Performance

  How has Texas Instruments performed over the past 5 years?

The past performance of a company can be measured by how much growth it has experienced and how much profit it makes relative to the funds and assets it has available.
Past earnings growth
Below we compare Texas Instruments's growth in the last year to its industry (Semiconductors and Semiconductor Equipment).
Past Earnings growth analysis
We also check if the company has grown in the past 5 years, and whether it has maintained that growth in the year.
  • Texas Instruments's year on year earnings growth rate has been positive on average over the past 5 years.
  • Texas Instruments's 1 year earnings growth exceeds its 5 year annual average (29.9% vs 8.1%)
  • Texas Instruments's earnings growth has not matched the US Semiconductors and Semiconductor Equipment industry average in the past year (29.9% vs 35.1%).
Earnings and Revenue History
Texas Instruments's revenue and profit over the past 5 years is shown below, any years where they have experienced a loss will show up in red.
Performance last year
We want to ensure a company is making the most of what it has available. This is done by comparing the return (profit) to a company's available funds, assets and capital.
  • Strong return on shareholders funds (ROE > 20%) last year.
  • Texas Instruments performed above the US Semiconductors and Semiconductor Equipment industry average based on Return on Assets (ROA) last year.
  • Performance based on Return on Capital Employed (ROCE) has improved significantly over 3 years.
X
Past performance checks
We assess Texas Instruments's performance over the past 5 years by checking for:
  1. Has earnings increased in past 5 years? (1 check)
  2. Has the earnings growth in the last year exceeded that of the Semiconductors and Semiconductor Equipment industry? (1 check)
  3. Is the recent earnings growth over the last year higher than the average annual growth over the past 5 years? (1 check)
  4. Is the Return on Equity (ROE) higher than 20%? (1 check)
  5. Is the Return on Assets (ROA) above industry average? (1 check)
  6. Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent earnings report. Some checks require at least 3 or 5 years worth of data.
Texas Instruments has a total score of 5/6, see the detailed checks below.

Note: We use GAAP Net Income excluding extraordinary items in all our calculations.

Full details on the Past part of the Simply Wall St company analysis model.

Health

 How is Texas Instruments's financial health and their level of debt?

A company's financial position is much like your own financial position, it includes everything you own (assets) and owe (liabilities).

The boxes below represent the relative size of what makes up Texas Instruments's finances.

The net worth of a company is the difference between its assets and liabilities.
Net Worth
  • Texas Instruments is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
  • Texas Instruments's cash and other short term assets cover its long term commitments.
Balance sheet
This treemap shows a more detailed breakdown of Texas Instruments's finances. If any of them are yellow this indicates they may be out of proportion and red means they relate to one of the checks below.
Assets
Liabilities and shares
The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
  • High level of stock/ inventory/ unsold assets.
  • Total debt is covered by total short term assets, assets are 2.2x debt.
Historical Debt
Nearly all companies have debt. Debt in itself isn’t bad, however if the debt is too high, or the company can’t afford to pay the interest on its debts this may have impacts in the future.

The graphic below shows equity (available funds) and debt, we ideally want to see the red area (debt) decreasing.

If there is any debt we look at the companies capability to repay it, and whether the level has increased over the past 5 years.
  • Texas Instruments's level of debt (32.6% of total debt) compared to net worth is satisfactory (less than 40%).
  • The level of debt compared to net worth has been reduced over the past 5 years (49.9% vs 32.6% today).
  • Total debt is well covered by annual operating cash flow (134.6%, greater than 20% of total debt).
  • Interest on debt is well covered by earnings (EBIT is 85.1x coverage).
X
Financial health checks
We assess Texas Instruments's financial health by checking for:
  1. Are short term assets greater than short term liabilities? (1 check)
  2. Are short term assets greater than long term liabilities? (1 check)
  3. Has the debt to equity ratio increased in the past 5 years? (1 check)
  4. Is the debt to equity ratio over 40%? (1 check)
  5. Is the debt covered by short term assets? (1 check)
  6. Are earnings greater than 5x the interest on debt (if company pays interest at all)? (1 check)
  7. Texas Instruments has a total score of 6/6, see the detailed checks below.


Full details on the Health part of the Simply Wall St company analysis model.

Dividends

 What is Texas Instruments's current dividend yield, its reliability and sustainability?

Dividends are regular cash payments to you from the company, similar to a bank paying you interest on a savings account.
Annual Dividend Income
Dividend payments
2.04%
Current annual income from Texas Instruments dividends. Estimated to be 2.29% next year.
If you bought $2,000 of Texas Instruments shares you are expected to receive $0 in your first year as a dividend.
Dividend Amount
Here we look how much dividend is being paid, if any. Is it above what you can get in a savings account? It is up there with the best dividend paying companies?
  • Paying below low risk savings rate (2.25%).
  • Paying below markets top dividend payers (3.18%).
Historical and Future Dividends
It is important to see if the dividend for a company is stable, and not wildly increasing/decreasing each year. This graph shows you the historical rate to count toward your assessment of the stock.

We also check to see if the dividend has increased in the past 10 years.
  • Dividends per share have been stable in the past 10 years.
  • Dividends per share have increased over the past 10 years.
Current Payout to shareholders
What portion of Texas Instruments's earnings are paid to the shareholders as a dividend.
  • Dividends paid are well covered by net profit (2.2x coverage).
Future Payout to shareholders
  • Dividends after 3 years are expected to be well covered by net profit (2x coverage).
X
Income/ dividend checks
We assess Texas Instruments's dividend by checking for:
  1. Firstly is the company paying a notable dividend (greater than 0.5%) - if not then the rest of the checks are ignored.
  2. Current dividend yield, is there one at all, is it higher than the low risk savings rate, and is it above the top 25% of dividend payers? (2 checks)
  3. Have they paid a dividend for 10 years, and during this period has the dividend been volatile (drop of more than 25%)? (1 check)
  4. If they have paid a dividend for 10 years has it increased in this time? (1 check)
  5. How sustainable is the dividend, can Texas Instruments afford to pay it from its earnings today and in 3 years (Payout ratio less than 90%)? (2 checks)
  6. Texas Instruments has a total score of 4/6, see the detailed checks below.


Full details on the Dividends part of the Simply Wall St company analysis model.

Management

 What is the CEO of Texas Instruments's salary, the management and board of directors tenure and is there insider trading?

Management is one of the most important areas of a company. We look at unreasonable CEO compensation, how long the team and board of directors have been around for and insider trading.
CEO
Rich Templeton, image provided by Google.
Rich Templeton
COMPENSATION $15,080,069
AGE 58
TENURE AS CEO 13.5 years
CEO Bio

Mr. Richard K. Templeton, also known as Rich, has been the Chief Executive Officer and President of Texas Instruments Inc. since May 2004. Mr. Templeton joined Texas Instruments Inc. in 1980 in the Semiconductor Group's sales and marketing organization and served as its Chief Operating Officer from 2000 to April 2004, Executive Vice President and President of Semiconductor division since 1996 and Senior Vice President since 1994. Mr. Templeton served as the President of Texas Instruments Inc. from May 2004 to April 2013. He served as a Texas Instruments Inc.'s Vice President since 1991 and was promoted to manager of worldwide application specific products in 1993, with responsibility for a wide range of products including digital signal processors. He has been the Chairman of Texas Instruments Inc. since April 17, 2008. He served as the Chairman of Semiconductor Industry Association. He has been an Executive Director of Texas Instruments Inc. since July 2003. He serves as a Director of Semiconductor Industry Association. He serves as a Director of Catalyst, Inc. He holds a Bachelors Degree in Electrical Engineering from Union College.

CEO Compensation
  • Rich's compensation has been consistent with company performance over the past year.
  • Rich's compensation appears reasonable.
Management Team Tenure

Average tenure and age of the Texas Instruments management team in years:

3.5
Average Tenure
51.7
Average Age
  • The tenure for the Texas Instruments management team is about average.
Management Team

Rich Templeton

TITLE
Chairman of The Board
COMPENSATION
$15M
AGE
58
TENURE
13.5 yrs

Brian Crutcher

TITLE
COO, Executive VP & Director
COMPENSATION
$9M
AGE
44
TENURE
0.8 yrs

Kevin Ritchie

TITLE
Senior Vice President of Technology and Manufacturing Group
COMPENSATION
$8M
AGE
60

Steve Anderson

TITLE
Senior VP of High Volume Analog & Logic
COMPENSATION
$6M
AGE
55

Rafael Lizardi

TITLE
CFO, Chief Accounting Officer & Senior VP
AGE
44
TENURE
0.8 yrs

Ellen Barker

TITLE
Chief Information Officer and Senior Vice President
AGE
54
TENURE
3.5 yrs

Dave Pahl

TITLE
Head of Investor Relations and Vice President
TENURE
3.3 yrs

Cynthia Trochu

TITLE
Chief Compliance Officer
AGE
53
TENURE
2.3 yrs

Julie Van Haren

TITLE
Senior Vice President of Communications & Investor Relations
AGE
48
TENURE
0.8 yrs

Bing Xie

TITLE
Senior Vice President of Worldwide Sales and Applications
AGE
49
TENURE
2.8 yrs
Board of Directors Tenure

Average tenure and age of the Texas Instruments board of directors in years:

10.6
Average Tenure
59.8
Average Age
  • The average tenure for the Texas Instruments board of directors is over 10 years, this suggests they are a seasoned and experienced board.
Board of Directors

Brian Crutcher

TITLE
COO, Executive VP & Director
COMPENSATION
$9M
AGE
44
TENURE
0.3 yrs

Wayne Sanders

TITLE
Independent Director
COMPENSATION
$301K
AGE
70
TENURE
20.8 yrs

Rich Templeton

TITLE
Chairman of The Board
COMPENSATION
$15M
AGE
58
TENURE
9.6 yrs

Ralph Babb

TITLE
Director
COMPENSATION
$323K
AGE
68
TENURE
7.7 yrs

Robert Sanchez

TITLE
Lead Director
COMPENSATION
$332K
AGE
52

Dan Carp

TITLE
Independent Director
COMPENSATION
$286K
AGE
69
TENURE
20.8 yrs

Pam Patsley

TITLE
Independent Director
COMPENSATION
$285K
AGE
60
TENURE
13.8 yrs

Carrie Cox

TITLE
Independent Director
COMPENSATION
$297K
AGE
59
TENURE
13.8 yrs

Mark Blinn

TITLE
Independent Director
COMPENSATION
$292K
AGE
55
TENURE
4.8 yrs

Ron Kirk

TITLE
Independent Director
COMPENSATION
$285K
AGE
63
TENURE
4.2 yrs
Recent Insider Trading
  • Texas Instruments insiders have only sold shares in the past 3 months.
Who owns this company?
X
Management checks
We assess Texas Instruments's management by checking for:
  1. Is the CEO's compensation unreasonable compared to market cap and profit (greater than 0.5% of the company's profit + 0.03% of market cap)? (1 check)
  2. Has the CEO's compensation increased more than 20% whilst the EPS is down more then 20%? (1 check)
  3. Is the average tenure of the management team less than 2 years? (1 check)
  4. Is the average tenure of the board of directors team less than 3 years? (1 check)
  5. Texas Instruments has a total score of 0/6, this is not included on the snowflake, see the detailed checks below.


Note: We use the top 6 management executives and board members in our calculations.

Note 2: Insider trading include any internal stakeholders and these transactions .

Full details on the Management part of the Simply Wall St company analysis model.

Company News

Company Info

Map
Description

Texas Instruments Incorporated designs, manufactures, and sells semiconductors to electronics designers and manufacturers worldwide. The company operates through two segments, Analog and Embedded Processing. The Analog segment offers high volume analog and logic products for automotive safety devices, touch screen controllers, low voltage motor drivers, and integrated motor controllers; and power products to manage power requirements using battery management solutions, portable power components, power supply controls, and point-of-load products. This segment also provides high performance analog products, such as high-speed data converters, amplifiers, sensors, high reliability products, interface products, and precision products; and silicon valley analog products, including power management, data converter, interface, and operational amplifier products that are used in manufacturing various electronic systems. The Embedded Processing segment offers processors, including digital signal processors and applications processors; microcontrollers, such as self-contained systems with a processor core, memory, and peripherals that are designed to control a set of specific tasks for electronic equipment; and connectivity products that enable electronic equipment to connect and transfer data wirelessly. It also provides DLP products primarily used in projectors to create high-definition images; calculators; and application-specific integrated circuits. The company markets and sells its semiconductor products through direct sales and distributors, as well as online. Texas Instruments Incorporated was founded in 1930 and is headquartered in Dallas, Texas.

Details
Name: Texas Instruments Incorporated
Ticker: TXN
Exchange: NasdaqGS
Founded: 1930
Market Cap: $96,663,782,765
Shares outstanding: 985,560,591
Website: http://www.ti.com
Address: Texas Instruments Incorporated
12500 TI Boulevard,
Dallas,
Texas, 75243,
United States
Listings
Exchange Symbol Ticker Symbol Security Exchange Country Currency Listed on
NasdaqGS TXN Common Stock Nasdaq Global Select US USD 02. Jan 1968
DB TII Common Stock Deutsche Boerse AG DE EUR 02. Jan 1968
SWX TXN Common Stock SIX Swiss Exchange CH CHF 02. Jan 1968
WBAG TXN Common Stock Wiener Boerse AG AT EUR 02. Jan 1968
BMV TXN * Common Stock Bolsa Mexicana de Valores MX MXN 02. Jan 1968
BASE TXN CEDEAR EACH 5 REP 1 ORD USD1 Buenos Aires Stock Exchange AR ARS 13. Sep 2000
BOVESPA TEXA34 EACH BDR REPR 1 COM USD1 Bolsa de Valores de Sao Paulo BR BRL 24. Aug 2015
Number of employees
Current staff
Staff numbers
29,865
Texas Instruments employees.
Industry
Industry: Semiconductors
Sector: Semiconductors and Semiconductor Equipment