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After Texas Instruments Incorporated’s (NASDAQ:TXN) earnings announcement on 31 December 2018, analyst forecasts seem bearish, with profits predicted to drop by -11% next year against the past 5-year average growth rate of 16%. Currently with a trailing-twelve-month profit of US$5.6b, the consensus growth rate suggests that earnings will drop to US$5.0b by 2020. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Texas Instruments in the longer term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
Exciting times ahead?
The view from 27 analysts over the next three years is one of positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To understand the overall trajectory of TXN’s earnings growth over these next fews years, I’ve fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.
This results in an annual growth rate of 0.8% based on the most recent earnings level of US$5.6b to the final forecast of US$5.7b by 2022. EPS reaches $6.19 in the final year of forecast compared to the current $5.75 EPS today. Margins are currently sitting at 35%, approximately the same as previous years. With analysts forecasting revenue growth of 0.03148 and TXN’s net income growth expected to roughly track that, this company may add value for shareholders over time.
Future outlook is only one aspect when you’re building an investment case for a stock. For Texas Instruments, there are three relevant factors you should look at:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is Texas Instruments worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Texas Instruments is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Texas Instruments? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.