Texas Instruments (TXN): fair value

Fair-value band

The normal range for this name runs from $208 (cheap) to $374 (expensive); it is now priced at $276.

That is 0.3σ below this name's own normal premium.

Is Texas Instruments undervalued?

Fair, relative to its own history. Texas Instruments trades at $276, 51% above the fair value this model estimates, but it has habitually traded 59% above fair value, and today's gap is 0.3σ below that norm, within the range it normally trades in, so the verdict is Fair: priced normally for itself, not necessarily fairly valued.

Diligence checklist

5 pass · 5 fail · 1 no data

• PASSCash actually collected from profit, last 12 months: 127%XBRL · Texas Instruments gets $1.27 of real cash for every $1 of reported profit which means profits are real and not just numbers on paper. That's a good sign.
• FAILGap between paper profit and real cash: -7.4%XBRL · Texas Instruments collected more cash than it booked as profit, by 7.4% of everything it owns. That is the conservative direction, but it is far enough past my 5% line to flag: a gap this wide usually means something large and non-cash is running through the earnings, and I want to know what it is before I trust the profit figure.
• PASSDebt compared to one year of cash earnings: 1.08xXBRL · It would take 1.08 years of earnings to clear what Texas Instruments owes, net of the cash it holds. My limit for a name I would buy is three years, so this passes, though the balance sheet is doing more of the work than it does at the top of this list.
• PASSHow much more it earns on capital than that capital costs: +6.46ppXBRL · Texas Instruments earns 6.5 points more on the capital it employs than that capital costs. The gap is real but not wide, so growth here creates value at a modest rate rather than compounding it. The gap is no wider than it was at the start of the window.
• FAILStock sold by executives and directors on the open market, last 6 months: $90.7MEDGAR (dealbreaker) · Lizardi Rafael R sold $25.8M of stock in the last 6 months, outside any pre-planned selling schedule, and $90.7M went out that way in total. My rulebook says more than $5 million of this kind of selling is disqualifying for a "long" position (buying the stock). The full list of open-market sellers: Lizardi Rafael R $25.8M, Yunus Mohammad $13.8M, Roberts Mark T. $7.9M. Options being exercised, and shares held back to cover the tax on them, are not sales and I don't count them either. filing ↗
• FAILHow long the CEO has run this company: 3.5 yearsTEXT · Texas Instruments's chief executive took the job on April 1, 2023, 3.5 years ago. I want a full cycle at the company, which I take as 5 years, before a management record tells me anything: a short run has not yet been tested by a bad year. filing ↗
• FAILProfit margin held up during the last sales slump: 58.7% vs 69.4% baseXBRL · The last time Texas Instruments's revenue fell, its profit margin per unit sold dropped from about 69.4% to 58.7%, giving up 15% of the margin it went in with. That looks like discounting to hold volume, which is the opposite of pricing power: a business customers won't leave doesn't have to pay them to stay. This is the accounts talking, not the filing: I'm reading the 8 quarters from June 2023 to March 2025, measured against the year going into it, and a shift in what the company sold can imitate pricing power either way.
• FAILNormal profit margin across a full business cycle: FCF margin 30.1% vs 17.8% medianXBRL · Texas Instruments is earning a 30.1% cash margin against a long-run average of 17.8%, 69% better than normal. This is what a cycle peak looks like, and paying for peak margins as though they were permanent is the classic way to overpay for a good business. My valuation grows the average instead. Across the window the margin ran between 7.7% in March 2024 and 41.5% in September 2021.
• N/AHow much of the stock trades on an average day: $1,576MMARKET · Texas Instruments trades so much volume that this basically isn't a concern. There's no pass or fail here because the answer depends on how big a position I'd actually want to take.
• PASSShare of revenue from its single biggest customer: 12%TEXT · Texas Instruments's February 6, 2026 10-K names a customer at 12% of revenue, in its own words: "Major customer One of our end customers accounted for 12 % of revenue in both 2025 and 2024, recognized primarily in our Analog segment". That's inside the quarter-of-revenue line where I stop work, but it is worth knowing whose buying decision moves the top line. filing ↗
• PASSWhether the company switched auditors in the last 2 years: noneEDGAR · Companies sometimes switch accounting auditors right before something bad is uncovered which can be a warning sign. Texas Instruments hasn't changed auditors in the last 2 years, so there's no such red flag here.