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)Â for a greater perspective!
Disclaimer: The author did not hold a position in Texas Instruments Inc. (TXN)Â 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.