Linked here’s a detailed quantitative evaluation of Texas Instruments Inc. (TXN). Beneath are some highlights from the above linked evaluation:
Firm Description: Texas Devices Inc. is without doubt one of the world’s largest producers of semiconductors, this firm additionally produces scientific calculator merchandise and DLP merchandise for TVs and video projectors.
Fair Value: In calculating truthful worth, I contemplate the NPV MMA Differential Honest Worth together with these 4 calculations of truthful worth, see web page 2 of the linked PDF for an in depth description:
1. Avg. Excessive Yield Value
2. 20-Yr DCF Value
3. Avg. P/E Value
4. Graham Quantity
TXN is buying and selling at a premium to all 4 valuations above. When additionally contemplating the NPV MMA Differential, the inventory is buying and selling at a 52.2% premium to its calculated truthful worth of $104.57. TXN didn’t earn any Stars on this part.
Dividend Analytical Data: On this part there are three potential Stars and three key metrics, see web page 2 of the linked PDF for an in depth description:
1. Free Money Circulation Payout
2. Debt To Complete Capital
3. Key Metrics
4. Dividend Progress Fee
5. Years of Div. Progress
6. Rolling 4-yr Div. > 15%
TXN earned one Star on this part for two.) above. The inventory earned a Star because of its most up-to-date Debt to Complete Capital being lower than 45% The corporate has paid a money dividend to shareholders yearly since 1962 and has elevated its dividend funds for 21 consecutive years.
The NPV MMA Diff. of the $213 is beneath the $1,400 goal I search for in a inventory that has elevated dividends so long as TXN has. If TXN grows its dividend at 3.6% per yr, it’s going to take 5 years to equal a MMA yielding an estimated 20-year common fee of three.75%.
Dividend Income vs. MMA: Why would you assume the fairness danger and put money into a dividend inventory if you happen to might earn a greater return in a a lot much less dangerous cash market account (MMA) or Treasury bond? This part compares the incomes capacity of this inventory with a high yield MMA. Two objects are thought of on this part, see web page 2 of the linked PDF for an in depth description:
1. NPV MMA Diff.
2. Years to > MMA
The NPV MMA Diff. of the $213 is beneath the $1,400 goal I search for in a inventory that has elevated dividends so long as TXN has. If TXN grows its dividend at 3.6% per yr, it’s going to take 5 years to equal a MMA yielding an estimated 20-year common fee of three.75%.
Friends: The corporate’s peer group contains: Analog Units, Inc. (ADI) with a 1.8% yield and QUALCOMM Integrated (QCOM) with a 2.2% yield.
Conclusion: TXN didn’t earn any Stars within the Honest Worth part, earned one Star within the Dividend Analytical Information part and didn’t earn any Stars within the Dividend Revenue vs. MMA part for a complete of 1 Star. This quantitatively ranks TXN as a 1-Star Very Weak inventory.
Utilizing my D4L-PreScreen.xls mannequin, I decided the share worth would want to lower to $95.13 earlier than TXN’s NPV MMA Differential elevated to the $1,400 minimal that I search for in a inventory with 21 years of consecutive dividend will increase. At that worth the inventory would yield 5.5%.
Resetting the D4L-PreScreen.xls mannequin and fixing for the dividend development fee wanted to generate the goal $1,400 NPV MMA Differential, the calculated fee is 8.7%. This dividend development fee is greater than the three.6% used on this evaluation, thus offering no margin of security. TXN has a risk rating of two.00 which classifies it as a Medium danger inventory.
TXN operates in a cyclical business producing a various line of semiconductor merchandise with publicity to many finish markets and clients. It has moved to a predominantly analog-based firm, which ought to generate greater margins, money circulation and end result it improved returns to shareholders. TXN enjoys robust financials together with a low debt to whole capital of 40% (up from 37%), however nonetheless well-below my 45% most. Its free money circulation payout of 353% (up from 77%) is well-above my most stage of 60%, and isn’t sustainable long-term. The inventory is presently buying and selling at a 52.2% premium to my calculated truthful worth. I’ll look ahead to a extra opportune time earlier than including to my place.
Disclaimer: Materials offered right here is for informational functions solely. The above quantitative inventory evaluation, together with the Star ranking, is mechanically calculated and relies on historic info. The evaluation assumes the inventory will carry out sooner or later because it has prior to now. That is usually by no means true. Earlier than shopping for or promoting any inventory you ought to do your personal analysis and attain your personal conclusion. See my Disclaimer for extra info.
Full Disclosure: On the time of this writing, I used to be lengthy in TXN (0.9% of my Dividend Progress Portfolio).
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