What Does Texas Instruments Incorporated's (NASDAQ:TXN) Share Price Indicate?

Texas Instruments Incorporated (NASDAQ:TXN) saw a significant share price rise of over 20% in the past couple of months on the NASDAQGS. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s take a look at Texas Instruments’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Texas Instruments

Is Texas Instruments still cheap?

Great news for investors – Texas Instruments is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 26.08x is currently well-below the industry average of 36.3x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Texas Instruments’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Texas Instruments?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a relatively muted profit growth of 5.9% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Texas Instruments, at least in the short term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since TXN is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on TXN for a while, now might be the time to enter the stock. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy TXN. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Texas Instruments.

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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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