Is Texas Instruments Incorporated (NASDAQ:TXN) Worth US$227 Based On Its Intrinsic Value?

Simply Wall St

Thu, February 12, 2026 at 8:00 PM GMT+9 6 min read

In this article:

TXN

+2.55%

Key Insights

The projected fair value for Texas Instruments is US$175 based on 2 Stage Free Cash Flow to Equity

Texas Instruments' US$227 share price signals that it might be 29% overvalued

Our fair value estimate is 20% lower than Texas Instruments' analyst price target of US$219

Does the February share price for Texas Instruments Incorporated (NASDAQ:TXN) reflect what it’s really worth? Today, we will estimate the stock’s intrinsic value by projecting its future cash flows and then discounting them to today’s value. This will be done using the Discounted Cash Flow (DCF) model. Believe it or not, it’s not too difficult to follow, as you’ll see from our example!

We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model.

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The Calculation

We’re using the 2-stage growth model, which simply means we take in account two stages of company’s growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. To start off with, we need to estimate the next ten years of cash flows. Where possible we use analyst estimates, but when these aren’t available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.

A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we need to discount the sum of these future cash flows to arrive at a present value estimate:

10-year free cash flow (FCF) estimate

(“Est” = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = US$66b

Story Continues  

The second stage is also known as Terminal Value, this is the business’s cash flow after the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country’s GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (3.4%) to estimate future growth. In the same way as with the 10-year ‘growth’ period, we discount future cash flows to today’s value, using a cost of equity of 11%.

Terminal Value (TV)$1 FCF2035 × (1 + g) ÷ (r – g) = US$18b× (1 + 3.4%) ÷ (11%– 3.4%) = US$257b

Present Value of Terminal Value (PVTV)$1 TV / (1 + r)10$1 US$257b÷ ( 1 + 11%)10$1 US$93b

The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$159b. In the final step we divide the equity value by the number of shares outstanding. Relative to the current share price of US$227, the company appears slightly overvalued at the time of writing. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out.

NasdaqGS:TXN Discounted Cash Flow February 12th 2026

The Assumptions

We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. If you don’t agree with these result, have a go at the calculation yourself and play with the assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company’s future capital requirements, so it does not give a full picture of a company’s potential performance. Given that we are looking at Texas Instruments as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we’ve used 11%, which is based on a levered beta of 1.639. Beta is a measure of a stock’s volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.

See our latest analysis for Texas Instruments

SWOT Analysis for Texas Instruments

Strength

Earnings growth over the past year exceeded its 5-year average.

Debt is well covered by earnings and cashflows.

Weakness

Earnings growth over the past year underperformed the Semiconductor industry.

Dividend is low compared to the top 25% of dividend payers in the Semiconductor market.

Expensive based on P/E ratio and estimated fair value.

Opportunity

Annual earnings are forecast to grow for the next 3 years.

Threat

Dividends are not covered by earnings and cashflows.

Annual earnings are forecast to grow slower than the American market.

Looking Ahead:

Whilst important, the DCF calculation is only one of many factors that you need to assess for a company. DCF models are not the be-all and end-all of investment valuation. Rather it should be seen as a guide to “what assumptions need to be true for this stock to be under/overvalued?” If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. Can we work out why the company is trading at a premium to intrinsic value? For Texas Instruments, there are three important aspects you should further research:

**Risks**: For example, we've discovered **2 warning signs for Texas Instruments** (1 can't be ignored!) that you should be aware of before investing here.

**Management**:Have insiders been ramping up their shares to take advantage of the market's sentiment for TXN's future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors.

**Other Solid Businesses**: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered!

PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the NASDAQGS every day. If you want to find the calculation for other stocks just search here.

Have feedback on this article? Concerned about the content? Get in touch** with us directly.**_ Alternatively, email editorial-team (at) simplywallst.com._

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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