Intrinsic value of Texas Instruments - TXN

Previous Close

$95.18

  Intrinsic Value

$77.41

stock screener

  Rating & Target

hold

-19%

  Value-price divergence*

+31%

Previous close

$95.18

 
Intrinsic value

$77.41

 
Up/down potential

-19%

 
Rating

hold

 
Value-price divergence*

+31%

*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 93.9

 

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
  12.80
  12.02
  11.32
  10.69
  10.12
  9.61
  9.15
  8.73
  8.36
  8.02
  7.72
  7.45
  7.20
  6.98
  6.78
  6.61
  6.45
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
Revenue, $m
  13,370
  15,081
  16,894
  18,806
  20,816
  22,922
  25,124
  27,421
  29,816
  32,307
  34,899
  37,593
  40,393
  43,302
  46,326
  49,469
  52,737
  56,136
  59,673
  63,355
  67,191
  71,187
  75,354
  79,701
  84,237
  88,973
  93,920
  99,089
  104,493
  110,144
  116,056
Variable operating expenses, $m
 
  10,064
  11,221
  12,442
  13,725
  15,069
  16,475
  17,941
  19,470
  21,060
  22,715
  23,999
  25,786
  27,643
  29,573
  31,580
  33,666
  35,836
  38,094
  40,444
  42,893
  45,444
  48,104
  50,879
  53,775
  56,798
  59,956
  63,256
  66,706
  70,313
  74,087
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
  10,064
  11,221
  12,442
  13,725
  15,069
  16,475
  17,941
  19,470
  21,060
  22,715
  23,999
  25,786
  27,643
  29,573
  31,580
  33,666
  35,836
  38,094
  40,444
  42,893
  45,444
  48,104
  50,879
  53,775
  56,798
  59,956
  63,256
  66,706
  70,313
  74,087
Operating income, $m
  4,799
  5,018
  5,673
  6,365
  7,091
  7,853
  8,649
  9,480
  10,346
  11,247
  12,184
  13,595
  14,607
  15,659
  16,753
  17,889
  19,071
  20,300
  21,579
  22,911
  24,298
  25,743
  27,250
  28,822
  30,462
  32,175
  33,964
  35,833
  37,787
  39,831
  41,969
EBITDA, $m
  5,754
  5,970
  6,687
  7,444
  8,240
  9,073
  9,945
  10,854
  11,802
  12,788
  13,814
  14,880
  15,989
  17,140
  18,337
  19,581
  20,875
  22,220
  23,620
  25,078
  26,596
  28,178
  29,827
  31,548
  33,343
  35,218
  37,176
  39,222
  41,361
  43,598
  45,938
Interest expense (income), $m
  0
  104
  128
  154
  180
  208
  238
  268
  301
  334
  369
  405
  443
  482
  522
  564
  608
  654
  701
  751
  802
  856
  912
  970
  1,030
  1,094
  1,160
  1,229
  1,301
  1,376
  1,455
Earnings before tax, $m
  4,930
  4,913
  5,545
  6,211
  6,911
  7,645
  8,411
  9,212
  10,045
  10,913
  11,815
  13,190
  14,165
  15,178
  16,230
  17,325
  18,463
  19,646
  20,878
  22,160
  23,496
  24,887
  26,339
  27,852
  29,432
  31,081
  32,804
  34,604
  36,486
  38,454
  40,513
Tax expense, $m
  1,335
  1,327
  1,497
  1,677
  1,866
  2,064
  2,271
  2,487
  2,712
  2,947
  3,190
  3,561
  3,824
  4,098
  4,382
  4,678
  4,985
  5,304
  5,637
  5,983
  6,344
  6,720
  7,111
  7,520
  7,947
  8,392
  8,857
  9,343
  9,851
  10,383
  10,939
Net income, $m
  3,595
  3,587
  4,048
  4,534
  5,045
  5,581
  6,140
  6,724
  7,333
  7,966
  8,625
  9,628
  10,340
  11,080
  11,848
  12,647
  13,478
  14,342
  15,241
  16,177
  17,152
  18,168
  19,227
  20,332
  21,485
  22,689
  23,947
  25,261
  26,635
  28,072
  29,575

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
  14,600
  16,354
  18,205
  20,151
  22,190
  24,321
  26,545
  28,863
  31,275
  33,784
  36,392
  39,103
  41,919
  44,846
  47,889
  51,052
  54,343
  57,767
  61,331
  65,044
  68,913
  72,947
  77,155
  81,546
  86,131
  90,919
  95,923
  101,155
  106,625
  112,348
Adjusted assets (=assets-cash), $m
  12,941
  14,600
  16,354
  18,205
  20,151
  22,190
  24,321
  26,545
  28,863
  31,275
  33,784
  36,392
  39,103
  41,919
  44,846
  47,889
  51,052
  54,343
  57,767
  61,331
  65,044
  68,913
  72,947
  77,155
  81,546
  86,131
  90,919
  95,923
  101,155
  106,625
  112,348
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
  4,539
  5,085
  5,661
  6,266
  6,900
  7,562
  8,254
  8,974
  9,725
  10,505
  11,316
  12,158
  13,034
  13,944
  14,890
  15,874
  16,897
  17,962
  19,070
  20,224
  21,427
  22,682
  23,990
  25,355
  26,781
  28,270
  29,826
  31,452
  33,153
  34,933
Working capital, $m
  5,193
  2,639
  2,956
  3,291
  3,643
  4,011
  4,397
  4,799
  5,218
  5,654
  6,107
  6,579
  7,069
  7,578
  8,107
  8,657
  9,229
  9,824
  10,443
  11,087
  11,758
  12,458
  13,187
  13,948
  14,741
  15,570
  16,436
  17,341
  18,286
  19,275
  20,310
Total debt, $m
  3,609
  3,666
  4,389
  5,152
  5,953
  6,793
  7,671
  8,588
  9,543
  10,536
  11,570
  12,645
  13,761
  14,922
  16,128
  17,381
  18,685
  20,040
  21,451
  22,920
  24,449
  26,043
  27,705
  29,439
  31,248
  33,137
  35,110
  37,171
  39,327
  41,581
  43,939
Total liabilities, $m
  5,958
  6,015
  6,738
  7,501
  8,302
  9,142
  10,020
  10,937
  11,892
  12,885
  13,919
  14,994
  16,110
  17,271
  18,477
  19,730
  21,034
  22,389
  23,800
  25,269
  26,798
  28,392
  30,054
  31,788
  33,597
  35,486
  37,459
  39,520
  41,676
  43,930
  46,288
Total equity, $m
  10,473
  8,585
  9,616
  10,705
  11,849
  13,048
  14,301
  15,609
  16,971
  18,390
  19,865
  21,399
  22,992
  24,648
  26,370
  28,159
  30,019
  31,954
  33,967
  36,063
  38,246
  40,521
  42,893
  45,367
  47,949
  50,645
  53,461
  56,403
  59,479
  62,696
  66,061
Total liabilities and equity, $m
  16,431
  14,600
  16,354
  18,206
  20,151
  22,190
  24,321
  26,546
  28,863
  31,275
  33,784
  36,393
  39,102
  41,919
  44,847
  47,889
  51,053
  54,343
  57,767
  61,332
  65,044
  68,913
  72,947
  77,155
  81,546
  86,131
  90,920
  95,923
  101,155
  106,626
  112,349
Debt-to-equity ratio
  0.345
  0.430
  0.460
  0.480
  0.500
  0.520
  0.540
  0.550
  0.560
  0.570
  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
  0.650
  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
  3,587
  4,048
  4,534
  5,045
  5,581
  6,140
  6,724
  7,333
  7,966
  8,625
  9,628
  10,340
  11,080
  11,848
  12,647
  13,478
  14,342
  15,241
  16,177
  17,152
  18,168
  19,227
  20,332
  21,485
  22,689
  23,947
  25,261
  26,635
  28,072
  29,575
Depreciation, amort., depletion, $m
  955
  952
  1,014
  1,079
  1,148
  1,220
  1,296
  1,374
  1,456
  1,541
  1,630
  1,286
  1,382
  1,481
  1,585
  1,692
  1,804
  1,920
  2,041
  2,167
  2,298
  2,435
  2,577
  2,726
  2,881
  3,043
  3,212
  3,389
  3,574
  3,767
  3,970
Funds from operations, $m
  4,668
  4,539
  5,062
  5,613
  6,193
  6,801
  7,436
  8,099
  8,789
  9,508
  10,255
  10,914
  11,722
  12,561
  13,433
  14,339
  15,282
  16,262
  17,282
  18,344
  19,450
  20,603
  21,805
  23,058
  24,367
  25,733
  27,159
  28,650
  30,209
  31,839
  33,544
Change in working capital, $m
  54
  299
  317
  335
  352
  369
  385
  402
  419
  436
  454
  471
  490
  509
  529
  550
  572
  595
  619
  644
  671
  699
  729
  761
  794
  829
  866
  905
  946
  989
  1,035
Cash from operations, $m
  4,614
  4,239
  4,745
  5,279
  5,842
  6,432
  7,051
  7,697
  8,370
  9,072
  9,802
  10,443
  11,232
  12,052
  12,904
  13,789
  14,710
  15,667
  16,663
  17,700
  18,779
  19,903
  21,075
  22,298
  23,573
  24,904
  26,294
  27,746
  29,263
  30,850
  32,510
Maintenance CAPEX, $m
  0
  -458
  -516
  -578
  -643
  -712
  -784
  -859
  -938
  -1,020
  -1,105
  -1,194
  -1,286
  -1,382
  -1,481
  -1,585
  -1,692
  -1,804
  -1,920
  -2,041
  -2,167
  -2,298
  -2,435
  -2,577
  -2,726
  -2,881
  -3,043
  -3,212
  -3,389
  -3,574
  -3,767
New CAPEX, $m
  -531
  -513
  -546
  -576
  -605
  -634
  -663
  -692
  -721
  -750
  -780
  -811
  -843
  -876
  -910
  -946
  -984
  -1,023
  -1,065
  -1,108
  -1,154
  -1,203
  -1,254
  -1,308
  -1,365
  -1,426
  -1,489
  -1,556
  -1,627
  -1,701
  -1,779
Cash from investing activities, $m
  -650
  -971
  -1,062
  -1,154
  -1,248
  -1,346
  -1,447
  -1,551
  -1,659
  -1,770
  -1,885
  -2,005
  -2,129
  -2,258
  -2,391
  -2,531
  -2,676
  -2,827
  -2,985
  -3,149
  -3,321
  -3,501
  -3,689
  -3,885
  -4,091
  -4,307
  -4,532
  -4,768
  -5,016
  -5,275
  -5,546
Free cash flow, $m
  3,964
  3,269
  3,683
  4,125
  4,593
  5,086
  5,604
  6,146
  6,712
  7,302
  7,916
  8,438
  9,103
  9,794
  10,512
  11,259
  12,034
  12,840
  13,678
  14,550
  15,457
  16,402
  17,386
  18,412
  19,481
  20,597
  21,761
  22,977
  24,248
  25,575
  26,963
Issuance/(repayment) of debt, $m
  -501
  688
  723
  763
  802
  840
  878
  916
  955
  994
  1,034
  1,075
  1,117
  1,160
  1,206
  1,254
  1,303
  1,356
  1,411
  1,469
  1,530
  1,594
  1,662
  1,734
  1,809
  1,889
  1,973
  2,062
  2,155
  2,254
  2,358
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
  688
  723
  763
  802
  840
  878
  916
  955
  994
  1,034
  1,075
  1,117
  1,160
  1,206
  1,254
  1,303
  1,356
  1,411
  1,469
  1,530
  1,594
  1,662
  1,734
  1,809
  1,889
  1,973
  2,062
  2,155
  2,254
  2,358
Total cash flow (excl. dividends), $m
  1,800
  3,957
  4,406
  4,888
  5,395
  5,926
  6,482
  7,062
  7,666
  8,296
  8,950
  9,513
  10,220
  10,955
  11,718
  12,512
  13,337
  14,196
  15,089
  16,019
  16,987
  17,996
  19,048
  20,145
  21,290
  22,486
  23,734
  25,039
  26,403
  27,829
  29,321
Retained Cash Flow (-), $m
  -527
  -971
  -1,032
  -1,088
  -1,144
  -1,199
  -1,253
  -1,308
  -1,363
  -1,418
  -1,475
  -1,534
  -1,594
  -1,656
  -1,721
  -1,789
  -1,860
  -1,935
  -2,013
  -2,096
  -2,183
  -2,275
  -2,372
  -2,474
  -2,582
  -2,696
  -2,816
  -2,942
  -3,076
  -3,217
  -3,365
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
 
  5,845
  3,374
  3,800
  4,251
  4,727
  5,229
  5,754
  6,304
  6,877
  7,475
  7,979
  8,626
  9,299
  9,997
  10,723
  11,477
  12,261
  13,076
  13,923
  14,804
  15,721
  16,676
  17,671
  18,708
  19,790
  20,919
  22,097
  23,327
  24,612
  25,956
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
 
  5,604
  3,089
  3,307
  3,500
  3,664
  3,795
  3,887
  3,940
  3,951
  3,919
  3,789
  3,681
  3,535
  3,356
  3,148
  2,917
  2,668
  2,408
  2,144
  1,881
  1,626
  1,384
  1,158
  953
  770
  610
  474
  361
  269
  195
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, makes and sells semiconductors to electronics designers and manufacturers across the world. The Company operates through two segments: Analog and Embedded Processing. As of December 31, 2016, the Company had design, manufacturing or sales operations in more than 30 countries. The Company's Analog segment's product line includes High Volume Analog & Logic (HVAL), Power Management (Power), High Performance Analog (HPA) and Silicon Valley Analog (SVA). HVAL products support applications, such as automotive safety devices, touchscreen controllers, low-voltage motor drivers and integrated motor controllers. The Company's Embedded Processing segment's product line includes Processor, Microcontrollers and Connectivity. Processor products include digital signal processors (DSPs) and applications processors. DSPs perform mathematical computations to process digital data.

FINANCIAL RATIOS  of  Texas Instruments (TXN)

Valuation Ratios
P/E Ratio 26.4
Price to Sales 7.1
Price to Book 9.1
Price to Tangible Book
Price to Cash Flow 20.5
Price to Free Cash Flow 23.2
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 12.8% 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 986.787 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 $93.9 billion.

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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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