TSC Ratings' Updates: Texas Instruments

Current return on equity exceeded its return on equity from the same quarter one year prior. This is a clear sign of strength within the company. Compared with other companies in the semiconductors & semiconductor equipment industry and the overall market, TXN's return on equity significantly exceeds that of both the industry average and the S&P 500.

The gross profit margin for Texas Instruments is rather high; currently it is at 59.8%. Regardless of TXN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TXN's net profit margin of 17.5% compares favorably to the industry average.

TXN's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 34.8%, which is also worse than the performance of the S&P 500. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.

The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared with the semiconductors & semiconductor equipment industry average, but is greater than that of the S&P 500. The net income has decreased by 3.6% when compared with the same quarter one year ago, dropping from $610 million to $588 million. Texas Instruments had been rated a buy since July 15, 2006.