Intrinsic value of Texas Instruments - TXN

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$82.16

  Intrinsic Value

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  Value-price divergence*

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$82.16

 
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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of TXN stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 81.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.85
  13.10
  12.29
  11.56
  10.90
  10.31
  9.78
  9.30
  8.87
  8.49
  8.14
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
  6.22
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.42
  5.38
Revenue, $m
  13,370
  15,121
  16,980
  18,943
  21,009
  23,176
  25,443
  27,810
  30,278
  32,848
  35,521
  38,300
  41,189
  44,190
  47,310
  50,552
  53,923
  57,428
  61,075
  64,872
  68,825
  72,944
  77,238
  81,716
  86,388
  91,266
  96,360
  101,682
  107,245
  113,062
  119,146
Variable operating expenses, $m
 
  10,089
  11,276
  12,529
  13,848
  15,231
  16,678
  18,190
  19,765
  21,405
  23,112
  24,450
  26,294
  28,210
  30,201
  32,271
  34,423
  36,661
  38,989
  41,412
  43,936
  46,566
  49,307
  52,165
  55,148
  58,262
  61,514
  64,911
  68,463
  72,176
  76,060
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  8,571
  10,089
  11,276
  12,529
  13,848
  15,231
  16,678
  18,190
  19,765
  21,405
  23,112
  24,450
  26,294
  28,210
  30,201
  32,271
  34,423
  36,661
  38,989
  41,412
  43,936
  46,566
  49,307
  52,165
  55,148
  58,262
  61,514
  64,911
  68,463
  72,176
  76,060
Operating income, $m
  4,799
  5,032
  5,704
  6,414
  7,161
  7,945
  8,765
  9,621
  10,513
  11,442
  12,409
  13,850
  14,895
  15,980
  17,108
  18,281
  19,500
  20,767
  22,086
  23,459
  24,889
  26,378
  27,931
  29,550
  31,240
  33,004
  34,846
  36,771
  38,783
  40,886
  43,086
EBITDA, $m
  5,754
  5,923
  6,651
  7,420
  8,230
  9,078
  9,967
  10,894
  11,861
  12,867
  13,914
  15,003
  16,135
  17,311
  18,532
  19,803
  21,123
  22,496
  23,925
  25,412
  26,961
  28,574
  30,256
  32,010
  33,840
  35,751
  37,747
  39,831
  42,011
  44,289
  46,673
Interest expense (income), $m
  0
  104
  129
  155
  182
  211
  241
  273
  306
  340
  376
  414
  452
  493
  535
  578
  623
  671
  719
  770
  823
  879
  936
  996
  1,058
  1,124
  1,192
  1,263
  1,337
  1,415
  1,496
Earnings before tax, $m
  4,930
  4,928
  5,575
  6,259
  6,979
  7,734
  8,523
  9,348
  10,207
  11,102
  12,033
  13,437
  14,442
  15,488
  16,574
  17,703
  18,876
  20,097
  21,367
  22,689
  24,066
  25,500
  26,995
  28,555
  30,182
  31,880
  33,654
  35,508
  37,445
  39,471
  41,590
Tax expense, $m
  1,335
  1,331
  1,505
  1,690
  1,884
  2,088
  2,301
  2,524
  2,756
  2,998
  3,249
  3,628
  3,899
  4,182
  4,475
  4,780
  5,097
  5,426
  5,769
  6,126
  6,498
  6,885
  7,289
  7,710
  8,149
  8,608
  9,087
  9,587
  10,110
  10,657
  11,229
Net income, $m
  3,595
  3,597
  4,070
  4,569
  5,095
  5,646
  6,222
  6,824
  7,451
  8,104
  8,784
  9,809
  10,543
  11,306
  12,099
  12,923
  13,780
  14,671
  15,598
  16,563
  17,568
  18,615
  19,706
  20,845
  22,033
  23,273
  24,568
  25,921
  27,335
  28,814
  30,361

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3,490
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  16,431
  14,638
  16,437
  18,338
  20,338
  22,435
  24,630
  26,922
  29,311
  31,798
  34,386
  37,077
  39,873
  42,779
  45,799
  48,937
  52,200
  55,594
  59,124
  62,799
  66,626
  70,614
  74,770
  79,105
  83,628
  88,350
  93,281
  98,434
  103,819
  109,450
  115,340
Adjusted assets (=assets-cash), $m
  12,941
  14,638
  16,437
  18,338
  20,338
  22,435
  24,630
  26,922
  29,311
  31,798
  34,386
  37,077
  39,873
  42,779
  45,799
  48,937
  52,200
  55,594
  59,124
  62,799
  66,626
  70,614
  74,770
  79,105
  83,628
  88,350
  93,281
  98,434
  103,819
  109,450
  115,340
Revenue / Adjusted assets
  1.033
  1.033
  1.033
  1.033
  1.033
  1.033
  1.033
  1.033
  1.033
  1.033
  1.033
  1.033
  1.033
  1.033
  1.033
  1.033
  1.033
  1.033
  1.033
  1.033
  1.033
  1.033
  1.033
  1.033
  1.033
  1.033
  1.033
  1.033
  1.033
  1.033
  1.033
Average production assets, $m
  4,027
  4,552
  5,111
  5,702
  6,324
  6,976
  7,658
  8,371
  9,114
  9,887
  10,692
  11,528
  12,398
  13,301
  14,240
  15,216
  16,231
  17,286
  18,384
  19,526
  20,716
  21,956
  23,249
  24,596
  26,003
  27,471
  29,004
  30,606
  32,281
  34,032
  35,863
Working capital, $m
  5,193
  2,646
  2,971
  3,315
  3,677
  4,056
  4,452
  4,867
  5,299
  5,748
  6,216
  6,703
  7,208
  7,733
  8,279
  8,847
  9,436
  10,050
  10,688
  11,353
  12,044
  12,765
  13,517
  14,300
  15,118
  15,972
  16,863
  17,794
  18,768
  19,786
  20,851
Total debt, $m
  3,609
  3,682
  4,423
  5,206
  6,030
  6,894
  7,799
  8,743
  9,727
  10,752
  11,818
  12,927
  14,079
  15,276
  16,520
  17,813
  19,157
  20,556
  22,010
  23,524
  25,101
  26,744
  28,456
  30,242
  32,106
  34,051
  36,083
  38,206
  40,424
  42,744
  45,171
Total liabilities, $m
  5,958
  6,031
  6,772
  7,555
  8,379
  9,243
  10,148
  11,092
  12,076
  13,101
  14,167
  15,276
  16,428
  17,625
  18,869
  20,162
  21,506
  22,905
  24,359
  25,873
  27,450
  29,093
  30,805
  32,591
  34,455
  36,400
  38,432
  40,555
  42,773
  45,093
  47,520
Total equity, $m
  10,473
  8,607
  9,665
  10,783
  11,958
  13,192
  14,482
  15,830
  17,235
  18,697
  20,219
  21,801
  23,445
  25,154
  26,930
  28,775
  30,694
  32,689
  34,765
  36,926
  39,176
  41,521
  43,965
  46,514
  49,174
  51,950
  54,849
  57,879
  61,046
  64,357
  67,820
Total liabilities and equity, $m
  16,431
  14,638
  16,437
  18,338
  20,337
  22,435
  24,630
  26,922
  29,311
  31,798
  34,386
  37,077
  39,873
  42,779
  45,799
  48,937
  52,200
  55,594
  59,124
  62,799
  66,626
  70,614
  74,770
  79,105
  83,629
  88,350
  93,281
  98,434
  103,819
  109,450
  115,340
Debt-to-equity ratio
  0.345
  0.430
  0.460
  0.480
  0.500
  0.520
  0.540
  0.550
  0.560
  0.580
  0.580
  0.590
  0.600
  0.610
  0.610
  0.620
  0.620
  0.630
  0.630
  0.640
  0.640
  0.640
  0.650
  0.650
  0.650
  0.660
  0.660
  0.660
  0.660
  0.660
  0.670
Adjusted equity ratio
  0.540
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3,595
  3,597
  4,070
  4,569
  5,095
  5,646
  6,222
  6,824
  7,451
  8,104
  8,784
  9,809
  10,543
  11,306
  12,099
  12,923
  13,780
  14,671
  15,598
  16,563
  17,568
  18,615
  19,706
  20,845
  22,033
  23,273
  24,568
  25,921
  27,335
  28,814
  30,361
Depreciation, amort., depletion, $m
  955
  891
  947
  1,006
  1,069
  1,134
  1,202
  1,273
  1,348
  1,425
  1,505
  1,153
  1,240
  1,330
  1,424
  1,522
  1,623
  1,729
  1,838
  1,953
  2,072
  2,196
  2,325
  2,460
  2,600
  2,747
  2,900
  3,061
  3,228
  3,403
  3,586
Funds from operations, $m
  4,668
  4,489
  5,017
  5,576
  6,163
  6,779
  7,424
  8,097
  8,799
  9,529
  10,289
  10,962
  11,783
  12,636
  13,523
  14,445
  15,403
  16,399
  17,436
  18,516
  19,639
  20,811
  22,031
  23,304
  24,633
  26,020
  27,468
  28,981
  30,563
  32,217
  33,947
Change in working capital, $m
  54
  307
  325
  344
  361
  379
  397
  414
  432
  450
  468
  486
  505
  525
  546
  567
  590
  613
  638
  664
  692
  721
  751
  784
  818
  854
  891
  931
  974
  1,018
  1,065
Cash from operations, $m
  4,614
  4,182
  4,692
  5,232
  5,802
  6,400
  7,027
  7,683
  8,367
  9,080
  9,821
  10,475
  11,277
  12,111
  12,977
  13,877
  14,813
  15,786
  16,798
  17,851
  18,948
  20,090
  21,280
  22,521
  23,815
  25,166
  26,577
  28,050
  29,590
  31,199
  32,882
Maintenance CAPEX, $m
  0
  -403
  -455
  -511
  -570
  -632
  -698
  -766
  -837
  -911
  -989
  -1,069
  -1,153
  -1,240
  -1,330
  -1,424
  -1,522
  -1,623
  -1,729
  -1,838
  -1,953
  -2,072
  -2,196
  -2,325
  -2,460
  -2,600
  -2,747
  -2,900
  -3,061
  -3,228
  -3,403
New CAPEX, $m
  -531
  -525
  -559
  -591
  -622
  -652
  -682
  -713
  -743
  -773
  -805
  -837
  -869
  -904
  -939
  -976
  -1,015
  -1,055
  -1,098
  -1,143
  -1,190
  -1,240
  -1,292
  -1,348
  -1,406
  -1,468
  -1,533
  -1,602
  -1,674
  -1,751
  -1,831
Cash from investing activities, $m
  -650
  -928
  -1,014
  -1,102
  -1,192
  -1,284
  -1,380
  -1,479
  -1,580
  -1,684
  -1,794
  -1,906
  -2,022
  -2,144
  -2,269
  -2,400
  -2,537
  -2,678
  -2,827
  -2,981
  -3,143
  -3,312
  -3,488
  -3,673
  -3,866
  -4,068
  -4,280
  -4,502
  -4,735
  -4,979
  -5,234
Free cash flow, $m
  3,964
  3,254
  3,677
  4,130
  4,610
  5,116
  5,647
  6,204
  6,787
  7,395
  8,028
  8,570
  9,255
  9,968
  10,708
  11,477
  12,277
  13,108
  13,972
  14,870
  15,805
  16,778
  17,792
  18,848
  19,949
  21,098
  22,296
  23,548
  24,855
  26,220
  27,648
Issuance/(repayment) of debt, $m
  -501
  704
  741
  783
  824
  864
  904
  944
  984
  1,025
  1,066
  1,108
  1,152
  1,197
  1,244
  1,293
  1,344
  1,398
  1,455
  1,514
  1,577
  1,643
  1,712
  1,786
  1,864
  1,945
  2,032
  2,123
  2,219
  2,320
  2,427
Issuance/(repurchase) of shares, $m
  -1,660
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -2,164
  704
  741
  783
  824
  864
  904
  944
  984
  1,025
  1,066
  1,108
  1,152
  1,197
  1,244
  1,293
  1,344
  1,398
  1,455
  1,514
  1,577
  1,643
  1,712
  1,786
  1,864
  1,945
  2,032
  2,123
  2,219
  2,320
  2,427
Total cash flow (excl. dividends), $m
  1,800
  3,959
  4,419
  4,913
  5,434
  5,980
  6,551
  7,149
  7,771
  8,420
  9,094
  9,678
  10,407
  11,165
  11,952
  12,770
  13,621
  14,506
  15,426
  16,384
  17,382
  18,421
  19,504
  20,634
  21,813
  23,043
  24,328
  25,670
  27,073
  28,540
  30,075
Retained Cash Flow (-), $m
  -527
  -993
  -1,058
  -1,117
  -1,176
  -1,233
  -1,291
  -1,348
  -1,405
  -1,463
  -1,522
  -1,582
  -1,644
  -1,709
  -1,776
  -1,845
  -1,919
  -1,995
  -2,076
  -2,161
  -2,250
  -2,345
  -2,444
  -2,549
  -2,660
  -2,776
  -2,900
  -3,030
  -3,167
  -3,311
  -3,463
Prev. year cash balance distribution, $m
 
  2,859
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  5,824
  3,361
  3,796
  4,258
  4,746
  5,261
  5,801
  6,366
  6,957
  7,573
  8,096
  8,763
  9,456
  10,176
  10,925
  11,702
  12,510
  13,350
  14,223
  15,131
  16,076
  17,060
  18,085
  19,153
  20,267
  21,428
  22,641
  23,907
  25,229
  26,611
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  5,584
  3,077
  3,303
  3,506
  3,679
  3,818
  3,919
  3,979
  3,996
  3,970
  3,845
  3,739
  3,595
  3,416
  3,207
  2,974
  2,722
  2,459
  2,190
  1,923
  1,663
  1,416
  1,185
  976
  788
  625
  486
  370
  275
  200
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Texas Instruments Incorporated designs, manufactures, and sells semiconductors to electronics designers and manufacturers worldwide. The company operates through two segments, Analog and Embedded Processing. The Analog segment offers high volume analog and logic products for automotive safety devices, touch screen controllers, low voltage motor drivers, and integrated motor controllers; and power products to manage power requirements using battery management solutions, portable power components, power supply controls, and point-of-load products. This segment also provides high performance analog products, such as high-speed data converters, amplifiers, sensors, high reliability products, interface products, and precision products; and silicon valley analog products, including power management, data converter, interface, and operational amplifier products that are used in manufacturing various electronic systems. The Embedded Processing segment offers processors, including digital signal processors and applications processors; microcontrollers, such as self-contained systems with a processor core, memory, and peripherals that are designed to control a set of specific tasks for electronic equipment; and connectivity products that enable electronic equipment to connect and transfer data wirelessly. It also provides DLP products primarily used in projectors to create high-definition images; calculators; and application-specific integrated circuits. The company markets and sells its semiconductor products through direct sales and distributors, as well as online. Texas Instruments Incorporated was founded in 1930 and is headquartered in Dallas, Texas.

FINANCIAL RATIOS  of  Texas Instruments (TXN)

Valuation Ratios
P/E Ratio 22.8
Price to Sales 6.1
Price to Book 7.8
Price to Tangible Book
Price to Cash Flow 17.7
Price to Free Cash Flow 20
Growth Rates
Sales Growth Rate 2.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -3.6%
Cap. Spend. - 3 Yr. Gr. Rate 5.2%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity 28.4%
Total Debt to Equity 34.5%
Interest Coverage 0
Management Effectiveness
Return On Assets 22%
Ret/ On Assets - 3 Yr. Avg. 18.4%
Return On Total Capital 25.5%
Ret/ On T. Cap. - 3 Yr. Avg. 21.4%
Return On Equity 35.2%
Return On Equity - 3 Yr. Avg. 30.4%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 61.6%
Gross Margin - 3 Yr. Avg. 58.9%
EBITDA Margin 44%
EBITDA Margin - 3 Yr. Avg. 41.4%
Operating Margin 35.9%
Oper. Margin - 3 Yr. Avg. 33%
Pre-Tax Margin 36.9%
Pre-Tax Margin - 3 Yr. Avg. 33%
Net Profit Margin 26.9%
Net Profit Margin - 3 Yr. Avg. 23.8%
Effective Tax Rate 27.1%
Eff/ Tax Rate - 3 Yr. Avg. 27.8%
Payout Ratio 45.8%

TXN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TXN stock intrinsic value calculation we used $13370 million for the last fiscal year's total revenue generated by Texas Instruments. The default revenue input number comes from 2016 income statement of Texas Instruments. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our TXN stock valuation model: a) initial revenue growth rate of 13.1% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for TXN is calculated based on our internal credit rating of Texas Instruments, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Texas Instruments.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of TXN stock the variable cost ratio is equal to 67.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for TXN stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Texas Instruments.

Corporate tax rate of 27% is the nominal tax rate for Texas Instruments. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the TXN stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for TXN are equal to 30.1%.

Life of production assets of 10 years is the average useful life of capital assets used in Texas Instruments operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for TXN is equal to 17.5%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $10473 million for Texas Instruments - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 992.194 million for Texas Instruments is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Texas Instruments at the current share price and the inputted number of shares is $81.5 billion.


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COMPANY NEWS

▶ Texas Instruments board declares quarterly dividend   [Jul-19-17 05:45PM  PR Newswire]
▶ Hate Risk? You'll Love These 3 Tech Stocks   [Jul-17-17 09:32PM  Motley Fool]
▶ Stryker leading the June 14th IQ100   [01:08PM  CNBC Videos]
▶ Here's a Tech Stock Getting Ready to Really Sizzle   [Jul-12-17 03:25PM  TheStreet.com]
▶ Why Chip Stocks May Fall Further   [02:35PM  Investopedia]
▶ Better Buy: NVIDIA Corporation vs. Texas Instruments   [Jul-03-17 11:43AM  Motley Fool]
▶ Former Texas Instruments executive named head of North Texas Food Bank   [Jun-29-17 04:00PM  American City Business Journals]
▶ Technology Stocks Smashed as Biotech Soars   [02:00PM  Investopedia]
▶ Texas Instruments Tumbles   [Jun-27-17 03:40PM  TheStreet.com]
▶ Five Failed Tech Breakouts Highlight Risks   [06:31AM  Investor's Business Daily]
▶ The Next Nvidia Corporation (NVDA) Stock Driver: Hyperscale   [Jun-14-17 05:02PM  InvestorPlace]
▶ [$$] Decline in Technology Stocks Moderates in Monday's Session   [Jun-12-17 06:45PM  The Wall Street Journal]
▶ A Super Semiconductor ETF   [Jun-09-17 11:55AM  Investopedia]
▶ Device Analysis Reveals Chip Winners; Ambarella Tumbles On Outlook   [Jun-07-17 04:23PM  Investor's Business Daily]
▶ TI exec on new sensors: I want everybody on the planet to design this   [Jun-06-17 05:45PM  American City Business Journals]
▶ What Are Investors Sentiments around Broadcom Stock?   [Jun-05-17 09:05AM  Market Realist]
▶ Stocks Steady At Highs: These 3 Apple Chip Plays Are Near Buys   [06:20AM  Investor's Business Daily]
▶ [$$] TI's Four Core Advantages   [May-25-17 07:39AM  Barrons.com]
▶ 5 Leadership Lessons From Exceptionally Successful CEOs   [May-21-17 12:22PM  Motley Fool]
▶ Texas Instruments targets self-driving cars, more with sensor debut   [May-17-17 02:00PM  American City Business Journals]
▶ With Intel Down Big, Is Trouble Ahead for Semis?   [Apr-28-17 02:56PM  TheStreet.com]
▶ Texas Instruments, Macom Technology Get Upbeat Analyst Reviews   [04:37PM  Investor's Business Daily]
▶ Story Stocks from Briefing.com   [12:08PM  Briefing.com]
▶ Texas Instruments tops Street 1Q forecasts   [04:42PM  Associated Press]
Stock chart of TXN Financial statements of TXN Annual reports of TXN
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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