Texas Instruments Inc Valuation – March 2019 #TXN

Company Profile (excerpt from Reuters): Texas Instruments Incorporated, incorporated on December 23, 1938, designs, makes and sells semiconductors to electronics designers and manufacturers across the world. The Company operates through two segments: Analog and Embedded Processing. As of December 31, 2016, the Company had design, manufacturing or sales operations in more than 30 countries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TXN – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $100,065,963,125 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.27 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 131.11% Pass
6. Moderate PEmg Ratio PEmg < 20 24.10 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 11.50 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.27 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.77 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.43
MG Growth Estimate 13.46%
MG Value $156.82
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $64.21
MG Value based on 0% Growth $37.64
Market Implied Growth Rate 7.80%
Current Price $106.73
% of Intrinsic Value 68.06%

Texas Instruments Incorporated is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.33 in 2015 to an estimated $4.43 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.79% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Texas Instruments Incorporated revealed the company was trading above its Graham Number of $31.69. The company pays a dividend of $2.63 per share, for a yield of 2.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 24.07, which was below the industry average of 35.5, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-0.05.

Texas Instruments Incorporated performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$0.05
Graham Number $31.69
PEmg 24.07
Current Ratio 3.27
PB Ratio 11.48
Current Dividend $2.63
Dividend Yield 2.47%
Number of Consecutive Years of Dividend Growth 15

 

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $8,097,000,000
Total Current Liabilities $2,474,000,000
Long-Term Debt $4,319,000,000
Total Assets $17,137,000,000
Intangible Assets $5,079,000,000
Total Liabilities $8,143,000,000
Shares Outstanding (Diluted Average) 969,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.69
Dec2018 $5.59
Dec2017 $3.61
Dec2016 $3.48
Dec2015 $2.82
Dec2014 $2.57
Dec2013 $1.91
Dec2012 $1.51
Dec2011 $1.88
Dec2010 $2.62
Dec2009 $1.15
Dec2008 $1.44
Dec2007 $1.84
Dec2006 $2.78
Dec2005 $1.39
Dec2004 $1.05
Dec2003 $0.60
Dec2002 -$0.20
Dec2001 -$0.12
Dec2000 $1.71
Dec1999 $0.83

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.43
Dec2018 $4.07
Dec2017 $3.17
Dec2016 $2.78
Dec2015 $2.33
Dec2014 $2.09
Dec2013 $1.84
Dec2012 $1.78
Dec2011 $1.87
Dec2010 $1.90
Dec2009 $1.60
Dec2008 $1.78
Dec2007 $1.81
Dec2006 $1.57
Dec2005 $0.83
Dec2004 $0.57
Dec2003 $0.41

Recommended Reading:

Other ModernGraham posts about the company

Texas Instruments Inc Valuation – May 2018 $TXN
5 Best Stocks for Value Investors This Week – 2/18/17
Texas Instruments Inc Valuation – February 2017 $TXN
Texas Instruments Inc Valuation – August 2016 $TXN
15 Best Stocks For Value Investors This Week – 2/13/16

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Broadcom Inc Valuation – February 2019 $AVGO
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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Texas Instruments Inc Valuation – May 2018 $TXN

Company Profile (excerpt from Reuters): Texas Instruments Incorporated, incorporated on December 23, 1938, designs, makes and sells semiconductors to electronics designers and manufacturers across the world. The Company operates through two segments: Analog and Embedded Processing. As of December 31, 2016, the Company had design, manufacturing or sales operations in more than 30 countries.

TXN Chart

TXN data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TXN – May 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $108,082,317,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.62 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 118.41% Pass
6. Moderate PEmg Ratio PEmg < 20 27.91 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 10.43 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 4.62 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.53 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.96
MG Growth Estimate 13.35%
MG Value $139.23
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $57.36
MG Value based on 0% Growth $33.63
Market Implied Growth Rate 9.70%
Current Price $110.41
% of Intrinsic Value 79.30%

Texas Instruments Incorporated is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.09 in 2014 to an estimated $3.96 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 9.7% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Texas Instruments Incorporated revealed the company was trading above its Graham Number of $35.24. The company pays a dividend of $2.12 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 27.91, which was below the industry average of 49.78, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $1.72.

Texas Instruments Incorporated receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $1.72
Graham Number $35.24
PEmg 27.91
Current Ratio 4.62
PB Ratio 10.43
Current Dividend $2.12
Dividend Yield 1.92%
Number of Consecutive Years of Dividend Growth 14

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $8,590,000,000
Total Current Liabilities $1,860,000,000
Long-Term Debt $3,578,000,000
Total Assets $17,507,000,000
Intangible Assets $5,330,000,000
Total Liabilities $6,865,000,000
Shares Outstanding (Diluted Average) 1,005,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.25
Dec2017 $3.61
Dec2016 $3.48
Dec2015 $2.82
Dec2014 $2.57
Dec2013 $1.91
Dec2012 $1.51
Dec2011 $1.88
Dec2010 $2.62
Dec2009 $1.15
Dec2008 $1.44
Dec2007 $1.84
Dec2006 $2.78
Dec2005 $1.39
Dec2004 $1.05
Dec2003 $0.60
Dec2002 -$0.20
Dec2001 -$0.12
Dec2000 $1.71
Dec1999 $0.83
Dec1998 $0.26

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.96
Dec2017 $3.17
Dec2016 $2.78
Dec2015 $2.33
Dec2014 $2.09
Dec2013 $1.84
Dec2012 $1.78
Dec2011 $1.87
Dec2010 $1.90
Dec2009 $1.60
Dec2008 $1.78
Dec2007 $1.81
Dec2006 $1.57
Dec2005 $0.83
Dec2004 $0.57
Dec2003 $0.41
Dec2002 $0.37

Recommended Reading:

Other ModernGraham posts about the company

5 Best Stocks for Value Investors This Week – 2/18/17
Texas Instruments Inc Valuation – February 2017 $TXN
Texas Instruments Inc Valuation – August 2016 $TXN
15 Best Stocks For Value Investors This Week – 2/13/16
Texas Instruments Inc Valuation – February 2016 $TXN

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Qorvo Inc Valuation – April 2018 $QRVO
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Applied Materials Inc Valuation – April 2018 $AMAT
Broadcom Inc Valuation – April 2018 $AVGO
Microchip Technology Inc Valuation – April 2018 $MCHP
KLA-Tencor Corp Valuation – March 2018 $KLAC
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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Texas Instruments Inc Valuation – February 2017 $TXN

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Texas Instruments Inc (TXN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Texas Instruments Incorporated designs, makes and sells semiconductors to electronics designers and manufacturers across the world. The Company operates through two segments: Analog and Embedded Processing. Its Analog segment’s product line includes High Volume Analog & Logic (HVAL), Power Management (Power), High Performance Analog (HPA) and Silicon Valley Analog (SVA). Its Embedded Processing segment’s product line includes Processor, Microcontrollers and Connectivity. It is also engaged in smaller product lines, such as DLP products (primarily used in projectors to create high-definition images), certain custom semiconductors known as application-specific integrated circuits (ASICs) and calculators. The Company has design, manufacturing or sales operations in over 30 countries. It also offers baseband products, and OMAP applications processors and connectivity products, which are sold into smartphones and consumer tablets.

TXN Chart

TXN data by YCharts

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Downloadable PDF version of this valuation:

ModernGraham Valuation of TXN – February 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $75,842,694,948 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.29 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 88.10% Pass
6. Moderate PEmg Ratio PEmg < 20 24.14 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.34 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.29 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.57 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $3.13
MG Growth Estimate 10.49%
MG Value $92.21
Opinion Fairly Valued
MG Grade B-
MG Value based on 3% Growth $45.37
MG Value based on 0% Growth $26.59
Market Implied Growth Rate 7.82%
Current Price $75.52
% of Intrinsic Value 81.90%

Texas Instruments Incorporated is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.84 in 2013 to an estimated $3.13 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 7.82% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Texas Instruments Incorporated revealed the company was trading above its Graham Number of $28.78. The company pays a dividend of $1.64 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 24.14, which was below the industry average of 28.12, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $1.47.

Texas Instruments Incorporated performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $1.47
Graham Number $28.78
PEmg 24.14
Current Ratio 3.29
PB Ratio 7.34
Current Dividend $1.64
Dividend Yield 2.17%
Number of Consecutive Years of Dividend Growth 14

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $7,457,000,000
Total Current Liabilities $2,264,000,000
Long-Term Debt $2,978,000,000
Total Assets $16,431,000,000
Intangible Assets $5,678,000,000
Total Liabilities $5,958,000,000
Shares Outstanding (Diluted Average) 1,018,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.50
Dec2016 $3.48
Dec2015 $2.82
Dec2014 $2.57
Dec2013 $1.91
Dec2012 $1.51
Dec2011 $1.88
Dec2010 $2.62
Dec2009 $1.15
Dec2008 $1.44
Dec2007 $1.84
Dec2006 $2.78
Dec2005 $1.39
Dec2004 $1.05
Dec2003 $0.60
Dec2002 -$0.20
Dec2001 -$0.12
Dec2000 $1.71
Dec1999 $0.83
Dec1998 $0.26
Dec1997 $1.13

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.13
Dec2016 $2.78
Dec2015 $2.33
Dec2014 $2.09
Dec2013 $1.84
Dec2012 $1.78
Dec2011 $1.87
Dec2010 $1.90
Dec2009 $1.60
Dec2008 $1.78
Dec2007 $1.81
Dec2006 $1.57
Dec2005 $0.83
Dec2004 $0.57
Dec2003 $0.41
Dec2002 $0.37
Dec2001 $0.69

Recommended Reading:

Other ModernGraham posts about the company

15 Best Stocks For Value Investors This Week – 2/13/16
Texas Instruments Inc Valuation – February 2016 $TXN
Texas Instruments Inc Analysis – September 2015 Update $TXN
Texas Instruments Analysis – June 2015 Update $TXN
18 Companies in the Spotlight This Week – 3/15/15

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Texas Instruments Inc Valuation – August 2016 $TXN

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – July 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Texas Instruments Inc (TXN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Texas Instruments Incorporated designs, makes and sells semiconductors to electronics designers and manufacturers across the world. The Company operates through two segments: Analog and Embedded Processing. Its Analog segment’s product line includes High Volume Analog & Logic (HVAL), Power Management (Power), High Performance Analog (HPA) and Silicon Valley Analog (SVA). Its Embedded Processing segment’s product line includes Processor, Microcontrollers and Connectivity. It is also engaged in smaller product lines, such as DLP products (primarily used in projectors to create high-definition images), certain custom semiconductors known as application-specific integrated circuits (ASICs) and calculators. The Company has design, manufacturing or sales operations in over 30 countries. It also offers baseband products, and OMAP applications processors and connectivity products, which are sold into smartphones and consumer tablets.

TXN Chart

TXN data by YCharts

[level-free]
To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of TXN – August 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $70,636,276,401 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.36 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 89.16% Pass
6. Moderate PEmg Ratio PEmg < 20 26.84 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.17 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.36 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.63 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

TXN value chart August 2016

EPSmg $2.62
MG Growth Estimate 7.09%
MG Value $59.36
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $37.96
MG Value based on 0% Growth $22.25
Market Implied Growth Rate 9.17%
Current Price $70.27
% of Intrinsic Value 118.38%

Texas Instruments Incorporated is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.78 in 2012 to an estimated $2.62 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.17% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Texas Instruments Incorporated revealed the company was trading above its Graham Number of $25.85. The company pays a dividend of $1.48 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 26.84, which was above the industry average of 22.64. Finally, the company was trading above its Net Current Asset Value (NCAV) of $0.94.

Texas Instruments Incorporated receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

TXN charts August 2016

Net Current Asset Value (NCAV) $0.94
Graham Number $25.85
PEmg 26.84
Current Ratio 3.36
PB Ratio 7.17
Current Dividend $1.48
Dividend Yield 2.11%
Number of Consecutive Years of Dividend Growth 13

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Total Current Assets $6,689,000,000
Total Current Liabilities $1,991,000,000
Long-Term Debt $2,975,000,000
Total Assets $15,693,000,000
Intangible Assets $5,838,000,000
Total Liabilities $5,731,000,000
Shares Outstanding (Diluted Average) 1,016,000,000

Earnings Per Share History

Next Fiscal Year Estimate $2.99
Dec2015 $2.82
Dec2014 $2.57
Dec2013 $1.91
Dec2012 $1.51
Dec2011 $1.88
Dec2010 $2.62
Dec2009 $1.15
Dec2008 $1.44
Dec2007 $1.84
Dec2006 $2.78
Dec2005 $1.39
Dec2004 $1.05
Dec2003 $0.60
Dec2002 -$0.20
Dec2001 -$0.12
Dec2000 $1.71
Dec1999 $0.83
Dec1998 $0.26
Dec1997 $1.13
Dec1996 $0.05

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.62
Dec2015 $2.33
Dec2014 $2.09
Dec2013 $1.84
Dec2012 $1.78
Dec2011 $1.87
Dec2010 $1.90
Dec2009 $1.60
Dec2008 $1.78
Dec2007 $1.81
Dec2006 $1.57
Dec2005 $0.83
Dec2004 $0.57
Dec2003 $0.41
Dec2002 $0.37
Dec2001 $0.69
Dec2000 $1.00

Recommended Reading:

Other ModernGraham posts about the company

15 Best Stocks For Value Investors This Week – 2/13/16
Texas Instruments Inc Valuation – February 2016 $TXN
Texas Instruments Inc Analysis – September 2015 Update $TXN
Texas Instruments Inc Analysis – September 2015 Update $TXN
Texas Instruments Analysis – June 2015 Update $TXN

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Texas Instruments Inc Valuation – February 2016 $TXN

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – February 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Texas Instruments Inc (TXN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Texas Instruments Incorporated designs, makes and sells semiconductors to electronics designers and manufacturers across the world. The Company operates through two segments: Analog and Embedded Processing. The Company’s Analog segment includes the following product lines: High Volume Analog & Logic, Power Management, High Performance Analog and Silicon Valley Analog. The Company’s Embedded Processing segment includes the following product lines: Processor, Microcontrollers and Connectivity. The Company is also engaged in smaller product lines, such as DLP products, certain custom semiconductors known as application-specific integrated circuits, calculators, baseband products, and applications processors and connectivity products. The revenues from these smaller businesses are included under the Other segment. The Company has design, manufacturing or sales operations in 35 countries.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of TXN

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $52,461,694,942 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.77 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 82.62% Pass
6. Moderate PEmg Ratio PEmg < 20 20.10 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.31 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.77 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.69 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

TXN value chart February 2016

EPSmg $2.52
MG Growth Estimate 6.27%
MG Value $53.05
Opinion Fairly Valued
MG Value based on 3% Growth $36.56
MG Value based on 0% Growth $21.43
Market Implied Growth Rate 5.80%
Current Price $50.68
% of Intrinsic Value 95.52%

Texas Instruments Inc qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the high PEmg and PB ratios.  The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.78 in 2012 to an estimated $2.52 for 2016.  This level of demonstrated earnings growth supports the market’s implied estimate of 5.8% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

Stage 3: Information for Further Research

TXN charts February 2016

Net Current Asset Value (NCAV) $0.76
Graham Number $24.07
PEmg 20.10
Current Ratio 2.77
PB Ratio 5.31
Dividend Yield 2.76%
Number of Consecutive Years of Dividend Growth 13

 

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information Dec2015
Total Current Assets $7,074,000,000
Total Current Liabilities $2,555,000,000
Long-Term Debt $3,120,000,000
Total Assets $16,230,000,000
Intangible Assets $5,991,000,000
Total Liabilities $6,284,000,000
Shares Outstanding (Diluted Average) 1,043,000,000

Earnings Per Share History

Next Fiscal Year Estimate $2.70
Dec2015 $2.82
Dec2014 $2.57
Dec2013 $1.91
Dec2012 $1.51
Dec2011 $1.88
Dec2010 $2.62
Dec2009 $1.15
Dec2008 $1.44
Dec2007 $1.84
Dec2006 $2.78
Dec2005 $1.39
Dec2004 $1.05
Dec2003 $0.60
Dec2002 -$0.20
Dec2001 -$0.12
Dec2000 $1.71
Dec1999 $0.83
Dec1998 $0.26
Dec1997 $1.13
Dec1996 $0.05

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.52
Dec2015 $2.33
Dec2014 $2.09
Dec2013 $1.84
Dec2012 $1.78
Dec2011 $1.87
Dec2010 $1.90
Dec2009 $1.60
Dec2008 $1.78
Dec2007 $1.81
Dec2006 $1.57
Dec2005 $0.83
Dec2004 $0.57
Dec2003 $0.41
Dec2002 $0.37
Dec2001 $0.69
Dec2000 $1.00

Recommended Reading:

Other ModernGraham posts about the company

Texas Instruments Inc Analysis – September 2015 Update $TXN
Texas Instruments Analysis – June 2015 Update $TXN
18 Companies in the Spotlight This Week – 3/15/15
Texas Instruments Inc. Quarterly Valuation – March 2015 $TXN
27 Companies in the Spotlight This Week – 12/20/14

Other ModernGraham posts about related companies

Apple Inc Valuation – February 2016 $AAPL
Ametek Inc Valuation – February 2016 Update $AME
MTS Systems Corp Valuation – February 2016 Update $MTSC
Linear Technology Corp Valuation – January 2016 Update $LLTC
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Microchip Technology Inc Valuation – January 2016 Update $MCHP
Avago Technologies Ltd Valuation – January 2016 Update $AVGO
KLA-Tencor Corp Valuation – January 2016 Update $KLAC
Lam Research Corp Valuation – January 2016 Update $LRCX
Amphenol Corporation Valuation – January 2016 Update $APH

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Texas Instruments Inc Analysis – September 2015 Update $TXN

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – August 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Texas Instruments Inc (TXN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Texas Instruments Incorporated designs, makes and sells semiconductors to electronics designers and manufacturers across the world. The Company operates through two segments: Analog and Embedded Processing. The Company’s Analog segment includes the following product lines: High Volume Analog & Logic, Power Management, High Performance Analog and Silicon Valley Analog. The Company’s Embedded Processing segment includes the following product lines: Processor, Microcontrollers and Connectivity. The Company is also engaged in smaller product lines, such as DLP products, certain custom semiconductors known as application-specific integrated circuits, calculators, baseband products, and applications processors and connectivity products. The revenues from these smaller businesses are included under the Other segment. The Company has design, manufacturing or sales operations in 35 countries.

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To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
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Downloadable PDF version of this valuation:

ModernGraham Valuation of TXN – September 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $49,225,459,822 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.52 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 15.16% Fail
6. Moderate PEmg Ratio PEmg < 20 21.50 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.94 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.52 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.64 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

TXN value Chart September 2015

EPSmg $2.23
MG Growth Estimate 2.88%
MG Value $31.81
Opinion Overvalued
MG Value based on 3% Growth $32.34
MG Value based on 0% Growth $18.96
Market Implied Growth Rate 6.50%
Current Price $47.96
% of Intrinsic Value 150.77%

Texas Instruments qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings growth over the last ten years as well as the high PEmg and PB ratios.  The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.87 in 2011 to an estimated $2.23 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 6.5% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Texas Instruments Inc. (TXN)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

TXN Charts September 2015

Net Current Asset Value (NCAV) $0.70
Graham Number $23.54
PEmg 21.50
Current Ratio 2.52
PB Ratio 4.94
Dividend Yield 2.75%
Number of Consecutive Years of Dividend Growth 12

 

[/level-mg-stocks-screens-subscriber]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $8,060,000,000
Total Current Liabilities $3,193,000,000
Long-Term Debt $3,134,000,000
Total Assets $17,532,000,000
Intangible Assets $6,167,000,000
Total Liabilities $7,327,000,000
Shares Outstanding (Diluted Average) 1,051,000,000

Earnings Per Share History

Next Fiscal Year Estimate $2.51
Dec14 $2.57
Dec13 $1.91
Dec12 $1.51
Dec11 $1.88
Dec10 $2.62
Dec09 $1.15
Dec08 $1.45
Dec07 $1.84
Dec06 $2.78
Dec05 $1.39
Dec04 $1.05
Dec03 $0.68
Dec02 -$0.20
Dec01 -$0.12
Dec00 $1.71
Dec99 $0.84
Dec98 $0.26
Dec97 $1.14
Dec96 $0.04
Dec95 $0.70

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.23
Dec14 $2.09
Dec13 $1.84
Dec12 $1.78
Dec11 $1.87
Dec10 $1.90
Dec09 $1.60
Dec08 $1.79
Dec07 $1.82
Dec06 $1.58
Dec05 $0.84
Dec04 $0.59
Dec03 $0.43
Dec02 $0.37
Dec01 $0.69
Dec00 $1.00
Dec99 $0.63

Recommended Reading:

Other ModernGraham posts about the company

Texas Instruments Analysis – June 2015 Update $TXN
18 Companies in the Spotlight This Week – 3/15/15
Texas Instruments Inc. Quarterly Valuation – March 2015 $TXN
27 Companies in the Spotlight This Week – 12/20/14
Texas Instruments Inc. Quarterly Valuation – December 2014 $TXN

Other ModernGraham posts about related companies

My Personal Holdings: Apple Inc. – September 2015 Update $AAPL
The Best Stocks of the IT Hardware Industry – September 2015
Seagate Technology PLC Analysis – September 2015 Update $STX
Microchip Technology Inc. Analysis – September 2015 Update $MCHP
KLA-Tencor Corporation Analysis – September 2015 Update $KLAC
Avago Technologies Ltd Analysis – Initial Coverage $AVGO
Arrow Electronics Inc. Analysis – Initial Coverage $ARW
TE Connectivity Limited Analysis – August 2015 Update $TEL
Broadcom Corporation Analysis – August 2015 Update $BRCM
SanDisk Corporation Analysis – August 2015 Update $SNDK

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Texas Instruments Analysis – June 2015 Update $TXN

500px-Texas_Instruments_Logo.svgA lot of investors and analysts considering Texas Instruments (TXN) may be focused primarily on qualitative speculation about the company’s prospects. For example, Cory Renauer of Moaty Chowder recently wrote an article regarding the company’s dividend growth prospects, and Bob Ciura also believes the company has strong potential for dividend growth. While dividends are a key component to consider, it is critical when analyzing Texas Instruments to consider the company’s intrinsic value in relation to its price.

In fact, Benjamin Graham, the father of value investing, taught that the most important aspect to consider is whether a company is trading at a discount relative to its intrinsic value. It is through a thorough fundamental analysis that the investor is able to make a determination about a potential investment’s merits. Here’s a look at how the company fares in the ModernGraham valuation model.

The model is inspired by the teachings of Benjamin Graham and considers numerous metrics intended to help the investor reduce risk levels. The first part of the analysis is to determine whether the company is suitable for the very conservative Defensive Investor or the less conservative Enterprising Investor who is willing to spend a greater amount of time conducting further research.

In addition, Graham strongly suggested that investors avoid speculation in order to remove the subjective elements of emotion. This is best achieved by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another. By using the ModernGraham method, one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

TXN Chart

TXN data by YCharts

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Defensive Investor – Must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – Market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – Current ratio greater than 2 – PASS
  3. Earnings Stability – Positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – Has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – Earnings per share has increased by at least one-third over the last 10 years, using three-year averages at the beginning and end of the period – FAIL
  6. Moderate PEmg (price over normalized earnings) Ratio – PEmg is less than 20 – FAIL
  7. Moderate Price-to-Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – Must pass at least 4 of the following 5 tests to be suitable for a Defensive Investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – Current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt-to-Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – Positive earnings per share for at least 5 years – PASS
  4. Dividend Record – Currently pays a dividend – PASS
  5. Earnings Growth – EPSmg greater than that 5 years ago – PASS

Valuation Summary

Key Data

Recent Price $53.12
MG Value $33.04
MG Opinion Overvalued
Value Based on 3% Growth $32.68
Value Based on 0% Growth $19.16
Market Implied Growth Rate 7.53%
Net Current Asset Value (NCAV) $0.67
PEmg 23.57
Current Ratio 3.36
PB Ratio 5.44

Balance Sheet – March 2015

Current Assets $7,692,000,000
Current Liabilities $2,286,000,000
Total Debt $3,638,000,000
Total Assets $17,346,000,000
Intangible Assets $6,257,000,000
Total Liabilities $6,977,000,000
Outstanding Shares 1,061,000,000

Earnings Per Share

2015 (estimate) $2.58
2014 $2.57
2013 $1.91
2012 $1.51
2011 $1.88
2010 $2.62
2009 $1.15
2008 $1.44
2007 $1.84
2006 $2.78
2005 $1.39

Earnings Per Share – ModernGraham

2015 (estimate) $2.25
2014 $2.09
2013 $1.84
2012 $1.78
2011 $1.87
2010 $1.90

Dividend History

TXN Dividend Chart

TXN Dividend data by YCharts

Conclusion

Texas Instruments passes the initial requirements of the Enterprising Investor but not of the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last 10 years and the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to valuation, it is critical to consider the company’s earnings history. In this case, the company has seen its EPSmg (normalized earnings) rise from $1.87 in 2011 to an estimated $2.25 for 2015. This level of earnings growth does not support the market’s implied estimate for 7.53% annual growth over the next 7-10 years.

The recent earnings growth has averaged around 4.11% per year, so the market is implying there will be a rise in earnings growth. However, the ModernGraham valuation model uses a much more conservative growth estimate and returns an estimate of intrinsic value falling below the market’s price, indicating that Texas Instruments is overvalued at the present time.

Disclaimer:  The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

[/level-mg-stocks-screens-subscriber]

Texas Instruments Inc. Quarterly Valuation – March 2015 $TXN

500px-Texas_Instruments_Logo.svg

Texas Instruments is suitable for the Enterprising Investor, but not for the more conservative Defensive Investor, who is concerned with the low earnings growth over the last ten years and the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, Enterprising Investors should feel comfortable with the company and proceed to the next part of the analysis, which is a determination of the company’s intrinsic value.

With regard to the intrinsic value, the company has grown its EPSmg (normalized earnings) from $1.90 in 2010 to only $2.09 in 2014. This level of demonstrated growth does not support the market’s implied estimate for earnings growth of 9.42% annually over the next 7-10 years. The ModernGraham valuation model, therefore, returns an estimate of intrinsic value below the current price, indicating the company is overvalued at the present time.

Be sure to check out previous ModernGraham valuations of Texas Instruments Inc. (TXN) for a greater perspective!

Read the full valuation on Seeking Alpha!

TXN Chart

TXN data by YCharts

Disclaimer: The author did not hold a position in Texas Instruments Inc. (TXN) at the time of publication and had no intention of changing that position within the next 72 hours. Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Texas Instruments Inc. Quarterly Valuation – December 2014 $TXN

500px-Texas_Instruments_Logo.svg

After looking over the company’s fundamentals, Texas Instruments qualifies for the Enterprising Investor, as the investor type has no initial concerns. As for the more conservative Defensive Investor, there are numerous concerns including the low level of earnings growth over the last ten years, along with the high PEmg and PB ratios. As a result, only Enterprising Investors should feel comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

Estimating the intrinsic value requires examining the company’s earnings history. Texas Instruments has grown its EPSmg (normalized earnings) from $1.90 in 2010 to only an estimated $2.07 for 2014. This demonstrated level of earnings growth does not support the market’s implied estimate of 8.84% earnings growth. In recent years, the company has seen an average annual growth in earnings of only around 1.75%. As a result, the ModernGraham valuation model returns an estimate of intrinsic value below the market price at this time, and the company appears to be overvalued by the market.

Be sure to check out previous ModernGraham valuations of Texas Instrumentsfor greater perspective!

Read the full valuation on Seeking Alpha!

TXN Chart

TXN data by YCharts

Disclaimer:  The author did not hold a position in Texas Instruments Inc. (TXN) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Texas Instruments Inc. Quarterly Stock Valuation – September 2014 $TXN

500px-Texas_Instruments_Logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Undervalued Companies for the Enterprising Investor.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Texas Instruments (TXN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Texas Instruments Inc. (TI) designs and makes semiconductors that the Company sells to electronics designers and manufacturers all over the world. The Company has four segments: Analog, Embedded Processing, Wireless and Other. The Company’s products, more than 100,000 orderable parts, are integrated circuits that are used to accomplish many different things, such as converting and amplifying signals, interfacing with other devices, managing and distributing power, processing data, canceling noise and improving signal resolution. The Company sells catalog and, to a lesser extent, custom semiconductor products. The life cycles of catalog products generally span multiple years, with some products continuing to sell for decades after their initial release. The life cycles of custom products are generally determined by end-equipment upgrade cycles and can be as short as 12 to 24 months. In December 2013, TI acquired a building in the Chengdu Hi-Tech Zone from UTAC Chengdu Ltd.
TXN Chart

TXN data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $47.99
MG Value $23.04
MG Opinion Overvalued
Value Based on 3% Growth $29.27
Value Based on 0% Growth $17.16
Market Implied Growth Rate 7.64%
Net Current Asset Value (NCAV) $0.10
PEmg 23.77
Current Ratio 4.14
PB Ratio 4.90

Balance Sheet – 6/30/2014

Current Assets $7,456,000,000
Current Liabilities $1,803,000,000
Total Debt $4,394,000,000
Total Assets $17,810,000,000
Intangible Assets $6,525,000,000
Total Liabilities $7,344,000,000
Outstanding Shares 1,067,560,000

Earnings Per Share

2014 (estimate) $2.29
2013 $1.94
2012 $1.53
2011 $1.91
2010 $2.66
2009 $1.15
2008 $1.45
2007 $1.83
2006 $1.69
2005 $1.39
2004 $1.05

Earnings Per Share – ModernGraham

2014 (estimate) $2.02
2013 $1.87
2012 $1.80
2011 $1.89
2010 $1.84
2009 $1.45

Dividend History

TXN Dividend Chart

TXN Dividend data by YCharts

Conclusion:

Texas Instruments is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings growth over the last ten years as well as the high PEmg and PB ratios.  The Enterprising Investor has no initial concerns.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with research into the company and comparing it to other opportunities.  From a valuation perspective, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.84 in 2010 to an estimated $2.02 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 7.64% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

Be sure to check out the previous ModernGraham valuations of Texas Instruments (TXN) for more perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Texas Instruments (TXN)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Texas Instruments (TXN) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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