Here’s Why Texas Instruments’ 1.8x Move Since 2018 Does Not Come As A Surprise

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TXN: Texas Instruments logo
TXN
Texas Instruments

Texas Instruments Incorporated (NASDAQ: TXN) stock price grew more than 1.8x from around $94 in 2018 end to over $170 currently, primarily due to favorable changes in its P/S multiple. This does not come as a surprise, as the company has also witnessed a rise in revenue over this period, and revenue per share has risen, helped by a slight decrease in the outstanding share count.

In our interactive dashboard, Why Texas Instruments Stock Moved: TXN Stock Has Gained 82% Since 2018, we break down the factors behind this move.

(A) TXN’s Total Revenue has grown 16% from $15.8 billion in 2018 to $18.3 billion on an LTM basis

  • TXN’s total revenue first dropped from $15.8 billion in FY ’18 to $14.5 billion in FY ’20, due to the semiconductor supply glut and the pandemic further hurting demand.
  • Revenues then jumped to $18.3 billion in the most recent FY ’21 earnings as demand for TI’s semiconductors has risen.
  • Analog semiconductor sales make up the bulk of TI’s revenues, with $14.1 billion of the company’s sales coming from this segment as of FY ’21, making up more than 75% of total revenue.
  • For details about TXN revenues and comparison to peers, see Texas Instruments (TXN) Revenue Comparison
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(B) Revenue per share (RPS) increased 22% from $16.15 in 2018 to $19.73 currently

  • TXN revenue rose from $15.8 billion in 2018 to $18.3 billion currently, while the outstanding share count decreased from 977 million in 2018 to around 930 million currently.
  • Due to this, RPS has risen strongly from $16.15 in FY ’18 to $19.73 currently.

(C) Price-To-Sales (P/S) multiple for TXN rose steadily from 5.5x in 2018 to 10.5x in 2020, but stands at 8.7x currently, still more than 1.5x higher than its 2018 level

  • Due to rising expectations of TXN’s sales recovery since the pandemic, its P/S multiple rose steadily to over 10x in 2020.
  • However, amidst current geopolitical tensions dragging down the broader markets, the P/S multiple has pulled back and currently stands at a little under 9x.
  • For additional details about the company’s historical returns and comparison to peers, see Texas Instruments (TXN) Stock Return.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.

Returns Mar 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 TXN Return 1% -8% 136%
 S&P 500 Return -2% -10% 91%
 Trefis MS Portfolio Return -3% -13% 244%

[1] Month-to-date and year-to-date as of 3/10/2022
[2] Cumulative total returns since the end of 2016

 

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