Texas Instruments Inc. Stock Buy Recommendation Reiterated (TXN)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- Texas Instruments (Nasdaq: TXN) has been reiterated by TheStreet Ratings as a buy with a ratings score of B+ . The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins, largely solid financial position with reasonable debt levels by most measures, notable return on equity and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

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Highlights from the ratings report include:
  • Net operating cash flow has increased to $1,088.00 million or 12.04% when compared to the same quarter last year. In addition, TEXAS INSTRUMENTS INC has also vastly surpassed the industry average cash flow growth rate of -93.09%.
  • The gross profit margin for TEXAS INSTRUMENTS INC is rather high; currently it is at 56.30%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, TXN's net profit margin of 8.86% significantly trails the industry average.
  • TEXAS INSTRUMENTS INC's earnings per share declined by 8.0% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, TEXAS INSTRUMENTS INC reported lower earnings of $1.50 versus $1.87 in the prior year. This year, the market expects an improvement in earnings ($1.74 versus $1.50).
  • TXN, with its decline in revenue, slightly underperformed the industry average of 11.0%. Since the same quarter one year prior, revenues fell by 12.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • Despite currently having a low debt-to-equity ratio of 0.52, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.50 is sturdy.

Texas Instruments Incorporated engages in the design and sale of semiconductors to electronics designers and manufacturers worldwide. Texas Instruments has a market cap of $37.79 billion and is part of the technology sector and electronics industry. The company has a P/E ratio of 22.3, above the S&P 500 P/E ratio of 17.7. Shares are up 9.2% year to date as of the close of trading on Thursday.

You can view the full Texas Instruments Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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