Texas Instruments

Methodology

Texas Instruments' fair value calculation works well during stable semiconductor demand, but becomes unreliable during industry downturns when analog chip sales collapse below normalized levels. Investors should normalize earnings across the semiconductor cycle, as trough-period valuations can appear artificially expensive despite representing attractive entry points. The method is most useful when applied to mid-cycle earnings estimates reflecting TI's diversified analog and embedded processing exposure rather than current cyclical results.

Methodology

PEG ratios for TI can be misleading due to the cyclical nature of analog semiconductor demand, with growth rates swinging between expansion and contraction as industrial and automotive customers adjust inventory. During upcycles, low PEG ratios may suggest value when the business is actually near peak earnings, while high PEG ratios during downturns may indicate opportunity rather than overvaluation. Investors should compare PEG to normalized cycle averages and consider TI's pricing power and margin structure versus peers.

Methodology

Texas Instruments pays a substantial dividend reflecting the cash-generative nature of its analog business model with high incremental margins and capital-light manufacturing in legacy fabs. PEGY provides significant valuation support during cyclical downturns when earnings compress and PEG becomes elevated or meaningless. For income-focused investors, PEGY captures TI's commitment to returning excess cash through dividends while maintaining exposure to secular analog content growth in automotive and industrial applications.