Texas Instruments Incorporated is an American technology company headquartered in Dallas, Texas, that designs and manufactures semiconductors and various integrated circuits, which it sells to electronics designers and manufacturers globally. This week, I fundamentally analyze Texas Instruments’ stock. I review TXN’s operating segments, look at its key ratios, derive the intrinsic value using Discounted Cash Flow (DCF) analysis, and calculate the expected rate of return from this investment. Since this is a long video, please feel free to use the time stamps in the video if you only wish to watch certain topics.
I review various key ratios such as Revenue, Net Income, Shares outstanding, Dividends, Payout Ratio, Free Cash Flows (FCF), Financial Leverage, Current Ratio, Debt to Equity Ratio, Return on Equity (ROE), Days Sales Outstanding (DSO), Days Inventory, Payable Period, Cash Conversion Cycle, Inventory Turnover, etc.
After taking into account Texas Instruments’ 2020 free cash flow of $5,490 million figure, a 7% growth rate of FCF (growth for the next 10 years), 10% discount rate, 5% long term growth rate (growth from 10 year mark to perpetuity), 931 million shares outstanding, and $6,248 million of long term debt, the DCF analysis yields us an intrinsic value of $135.5 per share. If we drop the discount rate from 10% to 8.3%, the intrinsic value comes to $212.79 per share. Using the current stock price of about $190 per share, and taking into the shares outstanding and future projects of free cash flows, we get the annual expected rate of return to be 2.8% if we hold this security through 2060.
0:38 Business Overview
4:28 Key Ratios Analysis
14:00 Discounted Cash Flow Analysis / Intrinsic Value
16:23 Expected Rate of Return Calculation
17:28 Summary / Conclusion
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TI’s Website: here
Morningstar Key Ratios Link: here.
Useful Resources here.
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