Did Business Growth Power Texas Instruments’s (NASDAQ:TXN) Share Price Gain of 180%?

When you buy a stock there is always a possibility that it could drop 100%. But on a lighter note, a good company can see its share price rise well over 100%. Long term Texas Instruments Incorporated (NASDAQ:TXN) shareholders would be well aware of this, since the stock is up 180% in five years. It’s also up 13% in about a month. We note that Texas Instruments reported its financial results recently; luckily, you can catch up on the latest revenue and profit numbers in our company report.

See our latest analysis for Texas Instruments

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).

Over half a decade, Texas Instruments managed to grow its earnings per share at 22% a year. So the EPS growth rate is rather close to the annualized share price gain of 23% per year. Therefore one could conclude that sentiment towards the shares hasn’t morphed very much. Indeed, it would appear the share price is reacting to the EPS.

NasdaqGS:TXN Past and Future Earnings, July 30th 2019
NasdaqGS:TXN Past and Future Earnings, July 30th 2019

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of Texas Instruments’s earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Texas Instruments’s TSR for the last 5 years was 219%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It’s good to see that Texas Instruments has rewarded shareholders with a total shareholder return of 21% in the last twelve months. And that does include the dividend. Having said that, the five-year TSR of 26% a year, is even better. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Texas Instruments by clicking this link.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.