What’s Behind Texas Instruments Stock’s Consistent Outperformance Of The Markets?

TXN: Texas Instruments logo
Texas Instruments

Texas Instruments Incorporated (NASDAQ: TXN) stock price rose 1.6x from $104 in 2017 end to around $167 currently, primarily due to favorable changes in its sales and P/S multiple. During this period, the company, a designer and manufacturer of semiconductors and various integrated circuits, witnessed a strong 31% rise in revenues, and combined with an 8% drop in its outstanding share count, revenue per share jumped 42%. Additionally, over the same period, the S&P 500 returned around 40%, meaning that TXN stock managed to outperform the index since late 2017.

In our interactive dashboard, Why Texas Instruments Stock Moved: TXN Stock Has Gained 60% Since 2017, we break down the factors behind this move.

(A) Texas Instruments’ Total Revenue has grown 31% from $15 billion in FY 2017 to $19.6 billion on an LTM basis

  • TI’s total revenue initially dropped from $15 billion in FY ’17 to as low as $14.4 billion in FY ’19, as the semiconductor supply glut hampered sales growth.
  • However, revenues have bounced back since, and surged to $18.3 billion in FY ’21, currently standing even higher at $19.6 billion on an LTM basis.
  • TI’s largest segment is the analog semiconductor segment, which brought in $14.05 billion in FY ’21, making up more than 75% of the company’s total sales.
  • For additional details about TI’s revenues and comparison to peers, see Texas Instruments (TXN) Revenue Comparison
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(B) Revenue per share (RPS) increased 42% from $14.95 in FY 2017 to $21.21 currently

  • Texas Instruments revenue rose from $15 billion in 2017 to $19.6 billion currently, while the outstanding share count decreased from around 1 billion in 2017 to just a little over 900 million currently.
  • Due to this, RPS has jumped from $14.95 in FY ’17 to $21.21 currently.

(C) Price-To-Sales (P/S) multiple for Texas Instruments rose strongly from 6x in 2017 end to 9.7x by 2020 end, but has pulled back to 7.9x currently, still around 1.3x higher than its 2017 level

  • TI’s P/S multiple rose strongly to 9.7x by late 2020, on the back of rising investor expectations surrounding a revival in sales growth amidst rising demand for the company’s products.
  • However, due to current geopolitical tensions and the increased economic uncertainty weighing on the broader markets, the P/S multiple has pulled back, currently standing at around 7.9x.
  • For additional details about the company stock returns and comparison to peers, see Texas Instruments (TXN) Stock Return Comparison.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

 Returns Oct 2022
MTD [1]
YTD [1]
Total [2]
 TXN Return 9% -10% 132%
 S&P 500 Return 6% -20% 70%
 Trefis Multi-Strategy Portfolio 6% -22% 208%

[1] Month-to-date and year-to-date as of 10/5/2022
[2] Cumulative total returns since the end of 2016

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