TXN Texas Instruments
Wide-moat, cost-leading analog franchise — wonderful business, but price already assumes near-impossible 25% growth.
The business
TI designs and manufactures analog and embedded semiconductors (power management, signal chain, microcontrollers) sold to industrial, automotive, personal electronics, and communications customers. It differentiates on manufacturing scale, running its own 300mm wafer fabs in-house rather than relying on foundries, which lowers unit cost versus most analog peers.
Quality gate · 81/100
Moat & management
| Moat | wide moat |
| Source | cost advantage |
| Trajectory | widening |
| Management | excellent |
300mm in-house fabrication gives a structural ~30-40% cost advantage per die over 200mm-based competitors, and analog parts get designed into customer products for 10-15 year lifecycles, creating real switching costs across 100,000+ customers. Ongoing capex into Sherman, TX capacity is widening this cost gap further, though it's compressing near-term FCF.
20+ years of consistent dividend growth, flat share count (no dilution), transparent long-term FCF/share framework, and a willingness to invest counter-cyclically in capacity that smaller competitors can't match even though it depresses current FCF conversion.
Owner-earnings inputs
| Owner earnings (TTM) | 5.36B |
| Owner-earnings yield | 2.2% |
| Free-cash-flow yield | 2.2% |
| Growth used (normalized) | 8.0% |
| Market-implied growth (reverse DCF) | 25.0% |
| Terminal growth | 3.0% |
| Discount rate (hurdle) | 10.5% |
Projected owner earnings
| Yr | Owner earnings | Growth | PV |
|---|---|---|---|
| 1 | 5.78B | 8.0% | 5.23B |
| 2 | 6.23B | 7.6% | 5.10B |
| 3 | 6.68B | 7.3% | 4.95B |
| 4 | 7.14B | 6.9% | 4.79B |
| 5 | 7.61B | 6.6% | 4.62B |
| 6 | 8.08B | 6.2% | 4.44B |
| 7 | 8.56B | 5.9% | 4.25B |
| 8 | 9.03B | 5.5% | 4.06B |
| 9 | 9.49B | 5.1% | 3.86B |
| 10 | 9.95B | 4.8% | 3.66B |
| 11 | 10.39B | 4.4% | 3.46B |
| 12 | 10.81B | 4.1% | 3.26B |
| 13 | 11.21B | 3.7% | 3.06B |
| 14 | 11.59B | 3.4% | 2.86B |
| 15 | 11.94B | 3.0% | 2.66B |
Key risks
- Semiconductor cyclicality causes sharp multi-year earnings and FCF swings around inventory corrections
- Heavy ongoing capex could prove to be overbuilt capacity if industrial/auto demand disappoints, pressuring ROIC
- Rising Chinese analog competition at the low-to-mid end plus export-control/geopolitical exposure in China revenue
Catalysts
- Cyclical recovery in industrial and automotive end markets restoring revenue growth and operating leverage
- Capex cycle peaking as Sherman fabs ramp utilization, unlocking a step-up in FCF conversion and FCF/share
Recent news
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⚠ maintenance capex ≈ min(capex, D&A), capped at FCF · Price pays for ~25%/yr owner-earnings growth over 15y (reverse DCF); model credits 8%. · Rich vs our conservative value, but a quality business is not a short — stance is WAIT for a better price, not sell.