Texas Instruments TXN
What does Texas Instruments do?
Texas Instruments develops, manufactures and sells semiconductors for electronics designers and device manufacturers worldwide. The business is divided into two segments: Analog and Embedded Processing. The Analog segment comprises power semiconductors such as battery management, voltage converters, regulators and switches, as well as signal chain products that capture real-world signals, condition them and convert them into data. Embedded Processing supplies microcontrollers and processors that handle control and computing tasks in devices.
The products are used in industrial, automotive, consumer electronics, communications equipment and enterprise systems. The portfolio is very broad and is sold to a large number of customers, with a significant portion going through online direct sales and distributors. Competitively, the company is distinguished by its own manufacturing on large wafers, long product life cycles and a wide product variety. Its competitors include other analog and microcontroller providers such as Analog Devices, Infineon, NXP and STMicroelectronics.
Score profile
Rank vs. Semiconductors (40 companies). 10 = top of the group, 5 = middle. Calculated from the metrics below, without AI.
Metrics compared with the industry
On profitability and quality, Texas Instruments ranks among the best in the group Semiconductors (8.4/10). On growth, the company ranks above average in the group Semiconductors (6.2/10). On valuation (higher = cheaper), the stock ranks below average in the group Semiconductors (3.7/10). On financial strength, Texas Instruments ranks in the middle in the group Semiconductors (4.8/10).
| Metric | Stock | Group median | Ranking |
|---|---|---|---|
| Forward P/E | 26.0x | 18.7x | better than 30 % |
| Trailing P/E | 39.0x | 42.4x | better than 57 % |
| PEG ratio | 0.8x | 0.8x | better than 47 % |
| EV/EBITDA | 25.7x | 21.3x | better than 41 % |
| Price/sales | 13.2x | 5.8x | better than 29 % |
| Price/book | 14.3x | 5.1x | better than 14 % |
| Revenue growth | 27.7% | 25.5% | better than 54 % |
| Earnings growth | 77.0% | 7.4% | better than 70 % |
| Gross margin | 60.2% | 53.3% | better than 71 % |
| Operating margin | 47.6% | 15.5% | better than 89 % |
| Net margin | 34.3% | 10.3% | better than 89 % |
| Return on equity | 39.7% | 8.6% | better than 86 % |
| Debt/equity | 70.7% | 36.5% | better than 11 % |
| Current ratio | 5.6x | 3.3x | better than 79 % |
| Free cash flow yield | 1.7% | 1.3% | better than 53 % |
| Dividend yield | 2.0% | 1.2% | – |
| Payout ratio | 73.7% | 38.0% | – |
| Beta | 1.39 | 1.92 | – |
Valuation: what is Texas Instruments worth?
Two valuation approaches – a discounted cash flow model and a valuation at the industry’s median multiples – give Texas Instruments a model range of 148.87 USD to 248.37 USD per share.
29 analysts, average rating “Buy”, average price target 336.86 USD (+12.1%).
The full DCF matrix, the reverse DCF (what growth the price implies) and scenarios are part of the Pro analysis.
What the business depends on
- Demand from industrial and automotive electronics largely determines sales and factory utilization.
- A broad portfolio with long product life cycles provides recurring revenue across a large, diversified customer base.
- In-house manufacturing capacity and its utilization influence the cost structure, margins and free cash flow.
Risks
- The semiconductor industry is cyclical, so fluctuations in demand can noticeably weigh on revenue and factory utilization.
- High investment in in-house manufacturing capacity ties up capital and weighs on profitability when demand is weak.
- Trade restrictions, geopolitical tensions and competition from Chinese providers can affect the international business.
What to look for with Texas Instruments
Free cash flow relative to revenue is particularly informative because it shows how much is left for shareholders after the heavy manufacturing investment.