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Texas Instruments Fundamental Analysis January 2024

Texas Instrument Fundamental Analysis

Based in Dallas, Texas, Texas Instruments, Inc. is a leading manufacturer specializing in analog, mixed-signal, and digital signal processing (DSP) integrated circuits. The company operates manufacturing and design facilities, including wafer fabrication and assembly/test operations, across North America, Asia, and Europe.

Texas Instruments’ management approach focuses on fully utilizing its assets throughout their lifetimes and relying on external foundries to handle excess demand during peak periods.

In 2022, the company’s Analog segment was responsible for 76.7% of its total revenues, a slight increase from 76.6% in 2021. This segment’s products are divided into three categories: high-performance analog, high-volume analog and logic, and power management.

The Embedded Processing segment accounted for 16.3% of the total revenues, a decrease from 16.6% in 2021. This segment encompasses a range of products including TI’s OMAP, connectivity solutions, non-wireless DSPs, and microprocessors.

The Other segment, comprising smaller semiconductor product lines such as DLP products, RISC microprocessors, ASICs, calculators, educational tools, and royalties, contributed the remaining 7% of the revenues, up from 6.8% in 2021.

Texas Instruments’ diverse range of products is sold across various industries, including industrial, personal electronics, automotive, communications, enterprise, and other end-markets.






Blue chip name: Texas Instruments meets all the criteria to be considered a buy and hold forever stock: pay dividends, have reliable cash flow, and disciplined management with the foresight to play the long game.

Financial Strategy: The company is focused on a strategy that emphasizes long-term responsible growth and consistent increases in free cash flow (FCF). Since 2004, it has maintained an annual FCF growth rate of over 10%, alongside regular dividend payments and share repurchases. The dividends have experienced a lifetime compound annual growth rate (CAGR) of 25%, although this has moderated to 13% in recent years. Additionally, there has been a significant reduction in share count, nearly halving it. These financial strategies are reflected in the company’s stock price, which has seen a tenfold increase over the same period. The company pays about 57% of its earnings and uses the remaining cash flow for CAPEX and repurchases. The yield is running near 3%.The outlook for next year includes high-single-digit revenue growth and margin expansion, so another solid distribution increase is on the table. 
Positive Outlook: Texas Instruments is experiencing strong progress in its Embedded Processing segment. This growth is driven by increasing demand for embedded technologies in the automotive and industrial sectors. The company’s strategic investments in new areas of growth and its competitive strengths are providing additional support. Additionally, Texas Instruments is benefiting from robust activity in the personal electronics and enterprise systems markets. The company’s focus on long-life products and effective manufacturing approaches also adds to its positive outlook.

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