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Last update on 2024-06-05

Texas Instruments (TXN) - Piotroski F-Score Analysis for Year 2023 (Final Score: 3/9)

Texas Instruments (TXN) Piotroski F-Score 2023 analysis: 3/9. Assess company’s profitability, liquidity, and efficiency with insights on net income, cash flow, and more.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 3

We're running Texas Instruments (TXN) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
0
Operating Cashflow are higher than Netincome?
0
Leverage is declining?
0
Current Ratio is growing?
0
Number of shares not diluted?
1
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
0

We assessed Texas Instruments (TXN) using the Piotroski F-Score system. The overall score was 3 out of 9, indicating mediocre financial strength. Key observations: Profitability remained strong with positive net income ($6.51 billion) and Operating Cash Flow ($6.42 billion), but the Operating Cash Flow was slightly below net income. Liquidity showed some issues as leverage increased from 0.3027 in 2022 to 0.3284 in 2023 and the current ratio dipped slightly, while stock buybacks reduced outstanding shares (from 916 million to 908 million). Operating efficiency metrics like Gross Margin and Asset Turnover Ratio both dropped, signaling potential inefficiencies or market issues.

Insights for Value Investors Seeking Stable Income

Given the Piotroski Score of 3, Texas Instruments (TXN) shows some strong financial areas but also concerning inefficiencies and liquidity management issues. It's worth looking further into specific problem areas like declining gross margins and asset efficiency. While TXN has a long history of profitability and operational cash flow, the recent trends in leverage and asset turnover raise red flags. Potential investors should weigh the consistent profitability against the concerning trends before making decisions.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Texas Instruments (TXN)

Company has a positive net income?

The net income criterion examines whether a company is profitable in the reporting year. A positive net income suggests operational profitability.

Historical Net Income of Texas Instruments (TXN)

In 2023, Texas Instruments (TXN) reported a net income of $6.51 billion, showing profitability. Historical data over the last 20 years indicates that the company has consistently been profitable every year. However, compared to recent years like 2021 and 2022 when net income was $7.77 billion and $8.75 billion, respectively, the 2023 net income represents a decline. Despite this, the positive net income in 2023 earns a point in the Piotroski analysis.

Company has a positive cash flow?

Cash Flow from Operations (CFO) refers to the money generated by a company's regular business operations. It is a crucial indicator of a company's ability to generate sufficient positive cash flow to maintain and grow its operations, and hence sustain its financial health over the long term.

Historical Operating Cash Flow of Texas Instruments (TXN)

The Cash Flow from Operations (CFO) for Texas Instruments (TXN) in 2023 is positive, standing at $6.42 billion. This is a strong indicator of financial health, contributing positively to the Piotroski Score, and granting TXN an additional point in this facet of the analysis. Viewing the historical data, TXN has consistently maintained positive operating cash flows over the last two decades, reflecting resilience and robust operational efficiency. Given the CFO trend, TXN's capacity to fund its operations without resorting to external financing showcases its business proficiency. Hence, a positive CFO like this affirms TXN's operational competence and financial stability.

Return on Assets (ROA) are growing?

Explain the criterion for Texas Instruments (TXN) and why it is important to consider

Historical change in Return on Assets (ROA) of Texas Instruments (TXN)

Return on Assets (ROA) is a key financial metric that measures a company's ability to generate profit from its assets. It is crucial for investors because it provides insight into how efficiently a company’s management is using its assets to generate earnings. A higher ROA indicates that the company is more effectively converting its investments into net income.

Operating Cashflow are higher than Netincome?

Assess whether operating cash flow is higher than net income and its significance.

Historical accruals of Texas Instruments (TXN)

As of 2023, Texas Instruments reported an operating cash flow of $6.42 billion and a net income of $6.51 billion. Since the operating cash flow is lower than net income, this criterion scores 0, indicating a less favorable trend in cash flow management for this year. Over the past two decades, operating cash flow generally trended both upwards and downwards, with significant increases between 2015 and 2019, suggesting robust operational efficiency prior to the recent decline. Comparatively, net income has steadily grown, suggesting profitability but with recent year cash flow constraints that require monitoring.

Liquidity of Texas Instruments (TXN)

Leverage is declining?

Leverage assesses a firm's debt relative to its equity, crucial for evaluating financial stability.

Historical leverage of Texas Instruments (TXN)

Texas Instruments' leverage ratio has increased from 0.3027 in 2022 to 0.3284 in 2023. This is a negative trend based on the increase in leverage, which suggests a greater proportion of the company's capital is being financed by debt rather than equity. Consequently, this does not earn Piotroski's point for a decrease in leverage. Historically, Texas Instruments' leverage has shown a substantial rise since 2009, where it remained relatively low or zero in the preceding years. This recent increase marks a continued reliance on debt financing, which could impact financial flexibility.

Current Ratio is growing?

The current ratio measures a company's ability to cover short-term liabilities with its short-term assets.

Historical Current Ratio of Texas Instruments (TXN)

In 2023, Texas Instruments (TXN) reported a current ratio of 4.5548, which represents a slight decrease from 4.6972 in 2022. This decline in the current ratio indicates that the company's liquidity has decreased marginally. Examining the last 20 years, TXN's current ratio has generally been well above the industry median, showcasing its financial prudence. However, the decrease from 2022 to 2023 suggests a potential minor drawback in liquidity management. Historically, TXN maintained a robust liquidity position, and even though the ratio slightly decreased this year, it is still significantly better compared to the industry median of 3.4213 in 2023. Therefore, the financial prudence maintained by Texas Instruments over the years still stands solid despite the recent slight drop, but for the purpose of the Piotroski F-score, this criteria would receive a 0 point.

Number of shares not diluted?

Change in Shares Outstanding measures the difference in the number of shares issued by a company, indicating stock buybacks or issuances.

Historical outstanding shares of Texas Instruments (TXN)

In 2022, Texas Instruments (TXN) had 916 million outstanding shares. By 2023, this number decreased to 908 million. This decrease indicates a 0.87% reduction in shares outstanding. A reduction in shares can be seen positively because it often means the company is engaging in buybacks, returning value to shareholders, and potentially indicating management's confidence in the company. Comparing the last two decades, the trend is predominantly downward, pointing to consistent share buyback activity. This earns TXN a score of 1 on this Piotroski criterion, indicating a favorable decrease in shares outstanding, thus showing a shareholder-friendly approach.

Operating of Texas Instruments (TXN)

Cross Margin is growing?

Gross Margin essentially measures the percentage of revenue that exceeds the cost of goods sold (COGS). A rising Gross Margin often signals increased production efficiency or the ability to charge higher prices, influencing profitability positively.

Historical gross margin of Texas Instruments (TXN)

In 2023, Texas Instruments reported a Gross Margin of 0.629, compared to 0.6876 in 2022. This indicates a decline in Gross Margin, signaling that Texas Instruments faced higher production costs or competitive pricing pressures, which affected its profitability adversely. Over the past two decades, they have mostly stayed above the industry median Gross Margin. For instance, in 2022, their Gross Margin was 0.6876 while the industry median stood at 0.4909. However, in 2023, the company’s Gross Margin dropped to 0.629, but it's still higher than the industry median of 0.4919 for the same year. Thus, gamers note a dip year-over-year suggesting one-time effects or cyclical industry challenges. This would yield a 0 point score for this criterion per the Piotroski framework.

Asset Turnover Ratio is growing?

asset turnover ratio is an efficiency metric that evaluates how effectively a company uses its assets to generate sales revenue

Historical asset turnover ratio of Texas Instruments (TXN)

In 2023, Texas Instruments recorded an Asset Turnover Ratio of 0.5883, a decline from 0.772 in 2022. This represents a 23.8% decrease, which is concerning as it implies the company is less efficient in utilizing its assets to generate revenue compared to the previous year. Historical data shows significant fluctuations in TXN's Asset Turnover Ratio over the last 20 years, with a peak of 1.0945 in 2010 and a nadir of 0.5883 in 2023. This trend suggests potential operational inefficiencies or market conditions impacting sales efficiency. It is critical for investors to scrutinize underlying factors contributing to this decline.


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