Texas Instruments (TXN) is one of the most overlooked chipmakers in the industry. People have heard of the company because of its calculators but know very little about the chipmaking abilities of the company. Texas Instruments actually derives the bulk of its revenue from chips. While Intel gets much of the attention in the sector, Texas Instruments has been able to historically deliver solid results year after year with analog chips. The chipmaking industry is incredibly competitive and requires large amounts of capital to compete. That is because companies have to invest heavily in the latest technologies and has to fend off competitors. Texas Instruments has struggled in the industry over the past year with growth declining and has decided to refocus on its core operations. The company is aiming to reinvest in its analog chip business.
The biggest asset that Texas Instruments has is its balance sheet. The company has more than $6 billion in cash and just $3 billion dollars in debt. The company is cash rich with over $5.50 a share in cash. Texas Instruments generates $2.6 billion in free cash flow and $3.8 billion dollars from operations. That is what makes the stock attractive to investors looking for safety.
Texas Instruments currently trades at 2.9 times book value and 2.3 times sales. The stock trades at 10.5 times earnings which is high considering the negative growth rate over the past year. The forward P/E of 11.5 is based on a projected future growth rate of 10.5%. Return on equity and operating margins are high at over 30%.
The company is starting to become a more attractive dividend play as the payout and yield have been increasing. Texas Instruments recently boosted its dividend 31% up to 68 cent per share on an annual basis. The stock is currently yielding 2.45%. That is not yet in the area of a high yielder but it is improving. Texas Instruments appears to be in interesting rebound play for investors that think the stock can turn things around.
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