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Texas Instruments Incorporated (NASDAQ:TXN) saw significant share price movement during recent months on the NASDAQGS, rising to highs of $118.43 and falling to the lows of $103.21. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Texas Instruments’s current trading price of $106.72 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the 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 there are any catalysts for a price change.
What is Texas Instruments worth?
Texas Instruments appears to be overvalued by 39.73% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$107 on the market compared to my intrinsic value of $76.38. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Given that Texas Instruments’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Texas Instruments generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. Though in the case of Texas Instruments, it is expected to deliver a relatively unexciting earnings growth of 2.0%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in TXN’s future outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe TXN should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on TXN for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Texas Instruments. You can find everything you need to know about Texas Instruments in the latest infographic research report. If you are no longer interested in Texas Instruments, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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 firstname.lastname@example.org. 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.