Are Texas Instruments Shares Worth the Price Amid New US Chip Production Push?

Thinking about what to do with Texas Instruments stock right now? You are not alone. With so much buzz in the chip industry and numerous headlines about shifting supply chains and government interventions, it is no wonder investors are watching closely. The stock closed recently at $182.32, and its journey has been anything but boring. Over the past week, it has barely budged, up 0.2%. However, looking back thirty days, Texas Instruments has sold off by almost 9%. Year-to-date, shares are down 2.5%, and over the last year, they have dropped 6.9%. For the longer term, over three to five years, the story turns around, with gains of 19.8% and 41.7% respectively. This demonstrates that the company has managed to grow through plenty of industry cycles.

Sharp movements like this do not happen in a vacuum. There has been a series of news reports about Washington pushing for more U.S.-based chip production, suggestions of new tariffs on companies not relocating factories to the United States, and China launching its own trade investigations. All of this is changing how investors think about risk and potential growth for companies like Texas Instruments, which are central to the semiconductor supply chain.

So, is Texas Instruments undervalued? According to our review, it earns a solid valuation score of 3 out of 6, considered undervalued on half the metrics we track. However, numbers only tell part of the story. Up next, we will break down what really goes into those valuation checks and reveal an even more reliable way to judge the company’s value at the end of this article.

Why Texas Instruments is lagging behind its peers

Approach 1: Texas Instruments Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model calculates what a company’s stock should be worth today by estimating all future cash flows and discounting them back to their present value. This method relies on a combination of recent cash flows and analyst projections, along with long-term forecasts, to arrive at an intrinsic value for the business.

For Texas Instruments, the most recent twelve months of Free Cash Flow stood at $1.89 Billion. Analysts estimate that Free Cash Flow will increase over the next five years, reaching up to $9.99 Billion by 2029. These projections are in dollars. After year five, Simply Wall St extends the outlook using steady growth assumptions for the next decade.

According to this model, the fair value per share for Texas Instruments is $138.67. With shares currently trading at $182.32, the DCF analysis suggests the stock is trading roughly 31.5 percent above its intrinsic value. In other words, the current price appears stretched compared to fundamental cash flow forecasts.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Texas Instruments.

Our Discounted Cash Flow (DCF) analysis suggests Texas Instruments may be overvalued by 31.5%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Texas Instruments Price vs Earnings

The Price-to-Earnings (PE) ratio is a commonly used metric to value profitable companies because it relates a company’s current share price to its earnings per share, providing an accessible measure of what investors are willing to pay for each dollar of profit. For well-established businesses like Texas Instruments, the PE ratio helps investors make sense of valuation by considering current earnings as a starting point for future expectations.

What constitutes a “normal” or “fair” PE ratio often depends on expectations for future growth and perceived risks. Higher anticipated earnings growth or lower risk typically justify higher PE ratios, while slower growth or greater uncertainty translates to lower multiples. At present, Texas Instruments trades at a PE ratio of 33.1x. This is a bit lower than the semiconductor industry average of 37.7x and noticeably below the peer group, which averages about 50.3x.

Simply Wall St’s “Fair Ratio” for Texas Instruments is 33.9x. This proprietary measure factors in more than just simple averages. It accounts for variables like the company’s growth outlook, profit margins, market capitalization, and risk profile. By using a Fair Ratio instead of comparing against industry or peer averages, you get a more tailored and realistic sense of what the market should pay for Texas Instruments based on its own unique circumstances.

With the current PE ratio of 33.1x nearly matching the Fair Ratio of 33.9x, Texas Instruments appears to be trading in line with its fundamentals, neither stretched nor deeply discounted.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose Your Texas Instruments Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives. A Narrative is a powerful yet simple concept that lets you articulate your unique perspective on a company by connecting its business story to the numbers behind its future revenue, profit margins, and ultimately, your own fair value estimate.

Narratives on Simply Wall St work by guiding you to express your outlook and key assumptions about a company, tying together its recent news, financial forecasts, and market position with a transparent valuation model. Available to millions of investors on the Community page, Narratives make it easy to compare your fair value for Texas Instruments with the current share price, helping you decide with confidence when to buy or sell.

Unlike static analysis, Narratives are updated in real time as new events such as earnings or industry news roll in, so your investment thesis always reflects the latest data. For Texas Instruments, this could mean one investor sees the company's future driven by industrial automation and sets a fair value of $260 per share, while another, more cautious on regulatory risks, lands much closer to $141 per share. Which story fits your view? Using Narratives, you can make valuation personal, dynamic, and more insightful than ever.

For Texas Instruments, we'll make it really easy for you with previews of two leading Texas Instruments Narratives:

• 🐂 Texas Instruments Bull Case

  Fair value: $205.42

  Trading at approximately 11.3% below narrative fair value

  Projected revenue growth: 10.1%

  • Ongoing industrial automation and automotive semiconductor demand, combined with a focus on stable, high-margin products, are expected to drive resilient revenue and margin expansion.
  • Investments in domestic manufacturing and tax incentives are strengthening Texas Instruments' supply chain and free cash flow, supporting higher returns for shareholders.
  • Risks remain from increased competition, evolving technology trends, and geopolitical uncertainty, which could pressure margins and lead to revenue volatility.

• 🐻 Texas Instruments Bear Case

  Fair value: $141.27

  Trading at approximately 29.1% above narrative fair value

  Projected revenue growth: 6.5%

  • Rising competition, regulatory burdens, and maturing core markets threaten the company's growth and profit margins as well as operational simplicity.
  • Higher capital expenditures needed for compliance and manufacturing expansion may result in long-term margin compression and constrained free cash flow.
  • Despite cyclical recovery and supply chain resilience, analysts with this view believe market expectations are too high and that future growth will be more limited.

Do you think there's more to the story for Texas Instruments? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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