Intrinsic value of Texas Instruments - TXN

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$79.81

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$79.81

 
Intrinsic value

$60.00

 
Up/down potential

-25%

 
Rating

sell

 
Value-price divergence* premium content

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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 79.3

 

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
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
Revenue, $m
  13,370
  14,319
  15,306
  16,332
  17,398
  18,508
  19,663
  20,865
  22,118
  23,424
  24,786
  26,206
  27,689
  29,238
  30,856
  32,547
  34,315
  36,165
  38,099
  40,124
  42,244
  44,465
  46,790
  49,226
  51,779
  54,455
  57,260
  60,200
  63,284
  66,518
  69,909
Variable operating expenses, $m
 
  9,577
  10,207
  10,862
  11,543
  12,251
  12,988
  13,756
  14,556
  15,389
  16,259
  16,730
  17,676
  18,665
  19,698
  20,777
  21,906
  23,087
  24,322
  25,614
  26,968
  28,385
  29,870
  31,425
  33,055
  34,763
  36,553
  38,430
  40,399
  42,463
  44,628
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
  9,577
  10,207
  10,862
  11,543
  12,251
  12,988
  13,756
  14,556
  15,389
  16,259
  16,730
  17,676
  18,665
  19,698
  20,777
  21,906
  23,087
  24,322
  25,614
  26,968
  28,385
  29,870
  31,425
  33,055
  34,763
  36,553
  38,430
  40,399
  42,463
  44,628
Operating income, $m
  4,799
  4,742
  5,099
  5,470
  5,855
  6,257
  6,674
  7,109
  7,562
  8,034
  8,527
  9,477
  10,013
  10,573
  11,158
  11,770
  12,409
  13,078
  13,778
  14,510
  15,277
  16,080
  16,920
  17,801
  18,725
  19,692
  20,707
  21,770
  22,885
  24,054
  25,281
EBITDA, $m
  5,754
  5,668
  6,059
  6,465
  6,887
  7,326
  7,783
  8,259
  8,755
  9,272
  9,811
  10,373
  10,960
  11,573
  12,214
  12,883
  13,583
  14,315
  15,081
  15,882
  16,722
  17,600
  18,521
  19,485
  20,496
  21,555
  22,665
  23,829
  25,050
  26,330
  27,672
Interest expense (income), $m
  0
  104
  118
  131
  146
  161
  176
  192
  209
  227
  245
  264
  284
  304
  326
  349
  372
  397
  423
  450
  478
  507
  538
  571
  605
  641
  678
  717
  758
  801
  846
Earnings before tax, $m
  4,930
  4,638
  4,981
  5,338
  5,710
  6,096
  6,498
  6,917
  7,353
  7,808
  8,282
  9,213
  9,730
  10,269
  10,832
  11,421
  12,037
  12,681
  13,355
  14,060
  14,799
  15,572
  16,382
  17,231
  18,120
  19,052
  20,029
  21,053
  22,127
  23,253
  24,435
Tax expense, $m
  1,335
  1,252
  1,345
  1,441
  1,542
  1,646
  1,755
  1,868
  1,985
  2,108
  2,236
  2,488
  2,627
  2,773
  2,925
  3,084
  3,250
  3,424
  3,606
  3,796
  3,996
  4,204
  4,423
  4,652
  4,892
  5,144
  5,408
  5,684
  5,974
  6,278
  6,597
Net income, $m
  3,595
  3,386
  3,636
  3,897
  4,168
  4,450
  4,744
  5,049
  5,368
  5,700
  6,046
  6,726
  7,103
  7,496
  7,908
  8,338
  8,787
  9,257
  9,749
  10,264
  10,803
  11,368
  11,959
  12,578
  13,227
  13,908
  14,621
  15,369
  16,153
  16,975
  17,837

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
  13,862
  14,817
  15,810
  16,842
  17,916
  19,034
  20,199
  21,411
  22,676
  23,994
  25,369
  26,805
  28,304
  29,870
  31,507
  33,219
  35,009
  36,882
  38,843
  40,895
  43,044
  45,295
  47,654
  50,125
  52,715
  55,430
  58,277
  61,262
  64,393
  67,676
Adjusted assets (=assets-cash), $m
  12,941
  13,862
  14,817
  15,810
  16,842
  17,916
  19,034
  20,199
  21,411
  22,676
  23,994
  25,369
  26,805
  28,304
  29,870
  31,507
  33,219
  35,009
  36,882
  38,843
  40,895
  43,044
  45,295
  47,654
  50,125
  52,715
  55,430
  58,277
  61,262
  64,393
  67,676
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
  4,310
  4,607
  4,916
  5,237
  5,571
  5,918
  6,280
  6,658
  7,051
  7,460
  7,888
  8,335
  8,801
  9,288
  9,797
  10,329
  10,886
  11,468
  12,077
  12,716
  13,384
  14,084
  14,817
  15,586
  16,391
  17,235
  18,120
  19,048
  20,022
  21,043
Working capital, $m
  5,193
  2,506
  2,679
  2,858
  3,045
  3,239
  3,441
  3,651
  3,871
  4,099
  4,337
  4,586
  4,846
  5,117
  5,400
  5,696
  6,005
  6,329
  6,667
  7,022
  7,393
  7,781
  8,188
  8,615
  9,061
  9,530
  10,020
  10,535
  11,075
  11,641
  12,234
Total debt, $m
  3,609
  3,362
  3,756
  4,165
  4,590
  5,033
  5,493
  5,973
  6,473
  6,993
  7,536
  8,103
  8,695
  9,312
  9,958
  10,632
  11,337
  12,075
  12,846
  13,654
  14,500
  15,385
  16,313
  17,284
  18,303
  19,370
  20,488
  21,661
  22,891
  24,181
  25,534
Total liabilities, $m
  5,958
  5,711
  6,105
  6,514
  6,939
  7,382
  7,842
  8,322
  8,822
  9,342
  9,885
  10,452
  11,044
  11,661
  12,307
  12,981
  13,686
  14,424
  15,195
  16,003
  16,849
  17,734
  18,662
  19,633
  20,652
  21,719
  22,837
  24,010
  25,240
  26,530
  27,883
Total equity, $m
  10,473
  8,151
  8,712
  9,296
  9,903
  10,535
  11,192
  11,877
  12,590
  13,333
  14,108
  14,917
  15,761
  16,643
  17,564
  18,526
  19,533
  20,585
  21,687
  22,839
  24,046
  25,310
  26,634
  28,020
  29,474
  30,997
  32,593
  34,267
  36,022
  37,863
  39,793
Total liabilities and equity, $m
  16,431
  13,862
  14,817
  15,810
  16,842
  17,917
  19,034
  20,199
  21,412
  22,675
  23,993
  25,369
  26,805
  28,304
  29,871
  31,507
  33,219
  35,009
  36,882
  38,842
  40,895
  43,044
  45,296
  47,653
  50,126
  52,716
  55,430
  58,277
  61,262
  64,393
  67,676
Debt-to-equity ratio
  0.345
  0.410
  0.430
  0.450
  0.460
  0.480
  0.490
  0.500
  0.510
  0.520
  0.530
  0.540
  0.550
  0.560
  0.570
  0.570
  0.580
  0.590
  0.590
  0.600
  0.600
  0.610
  0.610
  0.620
  0.620
  0.620
  0.630
  0.630
  0.640
  0.640
  0.640
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
  3,386
  3,636
  3,897
  4,168
  4,450
  4,744
  5,049
  5,368
  5,700
  6,046
  6,726
  7,103
  7,496
  7,908
  8,338
  8,787
  9,257
  9,749
  10,264
  10,803
  11,368
  11,959
  12,578
  13,227
  13,908
  14,621
  15,369
  16,153
  16,975
  17,837
Depreciation, amort., depletion, $m
  955
  926
  960
  995
  1,031
  1,069
  1,109
  1,150
  1,193
  1,237
  1,284
  896
  947
  1,000
  1,055
  1,113
  1,174
  1,237
  1,303
  1,372
  1,445
  1,521
  1,600
  1,684
  1,771
  1,863
  1,959
  2,059
  2,165
  2,275
  2,391
Funds from operations, $m
  4,668
  4,312
  4,596
  4,892
  5,199
  5,519
  5,852
  6,199
  6,561
  6,937
  7,330
  7,622
  8,050
  8,496
  8,963
  9,451
  9,961
  10,494
  11,052
  11,637
  12,248
  12,888
  13,559
  14,262
  14,998
  15,770
  16,579
  17,428
  18,317
  19,250
  20,229
Change in working capital, $m
  54
  166
  173
  179
  187
  194
  202
  210
  219
  229
  238
  249
  260
  271
  283
  296
  309
  324
  339
  354
  371
  389
  407
  426
  447
  468
  491
  515
  540
  566
  594
Cash from operations, $m
  4,614
  3,947
  4,423
  4,712
  5,013
  5,325
  5,650
  5,989
  6,341
  6,709
  7,092
  7,373
  7,790
  8,225
  8,680
  9,155
  9,651
  10,171
  10,714
  11,282
  11,877
  12,500
  13,152
  13,836
  14,552
  15,302
  16,089
  16,913
  17,778
  18,684
  19,635
Maintenance CAPEX, $m
  0
  -458
  -490
  -524
  -559
  -595
  -633
  -673
  -714
  -757
  -801
  -848
  -896
  -947
  -1,000
  -1,055
  -1,113
  -1,174
  -1,237
  -1,303
  -1,372
  -1,445
  -1,521
  -1,600
  -1,684
  -1,771
  -1,863
  -1,959
  -2,059
  -2,165
  -2,275
New CAPEX, $m
  -531
  -284
  -297
  -309
  -321
  -334
  -348
  -362
  -377
  -393
  -410
  -428
  -446
  -466
  -487
  -509
  -532
  -557
  -582
  -610
  -638
  -668
  -700
  -733
  -768
  -805
  -844
  -885
  -928
  -973
  -1,021
Cash from investing activities, $m
  -650
  -742
  -787
  -833
  -880
  -929
  -981
  -1,035
  -1,091
  -1,150
  -1,211
  -1,276
  -1,342
  -1,413
  -1,487
  -1,564
  -1,645
  -1,731
  -1,819
  -1,913
  -2,010
  -2,113
  -2,221
  -2,333
  -2,452
  -2,576
  -2,707
  -2,844
  -2,987
  -3,138
  -3,296
Free cash flow, $m
  3,964
  3,206
  3,637
  3,880
  4,133
  4,396
  4,670
  4,954
  5,251
  5,559
  5,881
  6,098
  6,447
  6,812
  7,193
  7,590
  8,006
  8,440
  8,894
  9,369
  9,866
  10,387
  10,931
  11,502
  12,100
  12,726
  13,382
  14,069
  14,790
  15,546
  16,339
Issuance/(repayment) of debt, $m
  -501
  384
  393
  409
  425
  443
  461
  480
  500
  521
  543
  567
  591
  618
  645
  674
  705
  738
  772
  808
  846
  885
  927
  972
  1,018
  1,067
  1,119
  1,173
  1,230
  1,290
  1,353
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
  384
  393
  409
  425
  443
  461
  480
  500
  521
  543
  567
  591
  618
  645
  674
  705
  738
  772
  808
  846
  885
  927
  972
  1,018
  1,067
  1,119
  1,173
  1,230
  1,290
  1,353
Total cash flow (excl. dividends), $m
  1,800
  3,590
  4,030
  4,289
  4,558
  4,839
  5,130
  5,434
  5,750
  6,080
  6,424
  6,665
  7,039
  7,430
  7,838
  8,265
  8,711
  9,178
  9,666
  10,177
  10,712
  11,272
  11,859
  12,474
  13,118
  13,793
  14,500
  15,242
  16,020
  16,836
  17,692
Retained Cash Flow (-), $m
  -527
  -537
  -562
  -584
  -607
  -632
  -657
  -685
  -713
  -743
  -775
  -809
  -844
  -882
  -921
  -963
  -1,006
  -1,053
  -1,101
  -1,153
  -1,207
  -1,264
  -1,324
  -1,387
  -1,453
  -1,523
  -1,597
  -1,674
  -1,755
  -1,841
  -1,931
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
 
  5,912
  3,468
  3,705
  3,951
  4,207
  4,473
  4,749
  5,037
  5,337
  5,649
  5,856
  6,195
  6,548
  6,917
  7,302
  7,705
  8,125
  8,565
  9,024
  9,505
  10,009
  10,535
  11,087
  11,665
  12,270
  12,904
  13,568
  14,265
  14,995
  15,761
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
 
  5,668
  3,175
  3,225
  3,253
  3,261
  3,246
  3,209
  3,148
  3,066
  2,961
  2,781
  2,644
  2,490
  2,322
  2,144
  1,958
  1,768
  1,577
  1,390
  1,208
  1,035
  874
  727
  594
  477
  376
  291
  221
  164
  119
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 22.1
Price to Sales 5.9
Price to Book 7.6
Price to Tangible Book
Price to Cash Flow 17.2
Price to Free Cash Flow 19.5
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 7.1% 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 8.8 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 993.669 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 $79.3 billion.


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COMPANY NEWS

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Stock chart of TXN Financial statements 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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