Is It Time To Reassess Texas Instruments (TXN) After The Recent Share Price Pullback

• If you are wondering whether Texas Instruments at around US$186.42 is still a solid deal or starting to look stretched, you are not alone.
• The stock is up 5.0% year to date and 7.0% over the last year, but has recently seen a 12.1% decline over the last 30 days and a 1.2% slip in the past week, which can change how you think about both upside and risk.
• Recent coverage has focused on how Texas Instruments fits into the broader semiconductor space and what that means for capital allocation and long term positioning. This context is important because it shapes how investors interpret the recent pullback and the price they are willing to pay for the stock.
• On Simply Wall St’s 6 point valuation framework, Texas Instruments scores a 3 out of 6, so next you will see how different valuation approaches assess the shares today and then finish with a more holistic way to think about value that many investors overlook.

Find out why Texas Instruments's 7.0% return over the last year is lagging behind its peers.

Approach 1: Texas Instruments Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model takes projected future cash flows and discounts them back to today, aiming to estimate what those cash flows are worth in current dollars.

For Texas Instruments, the latest twelve month free cash flow sits at about $2.13b. The current model uses analyst free cash flow estimates out to 2030, then extends the picture using extrapolated figures from Simply Wall St. By 2030, free cash flow is projected at $12.11b, with annual values between 2026 and 2035 ranging from roughly $6.47b to $16.88b before discounting, and $5.84b to $7.23b after discounting back to today.

Using this 2 Stage Free Cash Flow to Equity model, the estimated intrinsic value for Texas Instruments is $163.42 per share. With the share price around $186.42, the DCF suggests the stock is about 14.1% overvalued on this cash flow view.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Texas Instruments may be overvalued by 14.1%. Discover 62 high quality undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Texas Instruments.

Approach 2: Texas Instruments Price vs Earnings

For a profitable company like Texas Instruments, the P/E ratio is a useful way to gauge what you are paying for each dollar of current earnings. It quickly shows how the market prices those earnings, which is often how many investors frame decisions for mature, cash generative businesses.

In general, higher growth expectations and lower perceived risk tend to support a higher P/E, while slower expected growth or higher risk usually align with a lower, more conservative P/E. So context really matters when you look at any single number.

Texas Instruments currently trades on a P/E of 34.13x. That sits slightly below the Semiconductor industry average of about 35.77x, and well below the peer group average of 84.11x, which can be skewed by companies with very high valuations. Simply Wall St’s Fair Ratio for Texas Instruments is 34.23x. This proprietary measure estimates what a “normal” P/E might look like after considering earnings growth, profit margins, industry, market cap and specific risks.

Because the Fair Ratio at 34.23x is very close to the actual 34.13x, the multiple suggests Texas Instruments is priced at roughly a fair level on this earnings based view.

Result: ABOUT RIGHT

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Upgrade Your Decision Making: Choose your Texas Instruments Narrative

Earlier it was mentioned that there is an even better way to understand valuation, so Narratives are introduced here as a simple way for you to attach a clear story about Texas Instruments to the numbers you care about, such as fair value, future revenue, earnings and margins. You can then see how that story translates into a financial forecast and finally into a fair value that can be compared with the current share price.

On Simply Wall St’s Community page, Narratives let you pick or adjust assumptions instead of accepting a single model. This allows you to see, for example, how one Texas Instruments view with a fair value of about US$314.44, revenue growth of roughly 15%, a 38% profit margin and a certain discount rate and future P/E compares with another view that sets fair value closer to US$160.00, uses revenue growth near 6.55%, profit margins around 30.14% and a higher discount rate. As news or earnings arrive, these inputs and fair values update, helping you decide whether the current price looks rich or attractive relative to the Narrative you find most realistic.

For Texas Instruments, here are previews of two leading Texas Instruments Narratives to make comparison easier:

🐂 Texas Instruments Bull Case

Fair value: US$314.44 per share

Gap to this fair value: around 40.7% below that level at the recent US$186.42 price

Revenue growth assumption: 15%

• Views Texas Instruments as being in the middle of a multiyear capacity build that is currently weighing on free cash flow, with the aim of supporting higher margins and more resilient supply over time.
• Highlights a mix of long lived analog and embedded products, a solid balance sheet, and a long record of dividend growth as factors supporting durable earnings power across multiple cycles.
• Suggests that current pricing reflects near term softness rather than the longer term demand tied to automation, electrification, and AI related applications that rely on Texas Instruments components.

🐻 Texas Instruments Bear Case

Fair value: US$160.00 per share

Gap to this fair value: about 16.5% above that level at the recent US$186.42 price

Revenue growth assumption: 6.55%

• Flags heavier competition, regulatory pressure, and maturing core markets as potential headwinds for growth and margins, particularly while spending on capacity and compliance remains elevated.
• Incorporates the risk that wafer fab expansions and higher inventories could lead to periods of lower utilization and compressed profitability if demand softens.
• Anchors on a lower Fair Value framework of about US$160 that assumes more modest revenue growth, profit margins around 30.14%, and a future P/E of roughly 30.31x, with the view that recent pricing embeds high expectations.

Taken together, these contrasting Narratives outline a clear range for what different investors consider Texas Instruments to be worth and why, helping you compare your own assumptions with both the more optimistic and the more cautious perspectives before making any decision.

Do you think there's more to the story for Texas Instruments? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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