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TXN – Market expectations are for Uniform ROA to reach new peaks, but management may be concerned about lead times, supply chain disruptions, and capacity

May 26, 2021

  • Texas Instruments Incorporated (TXN:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 23.3x Uniform P/E. At these levels, markets are pricing in bullish expectations for the firm, but management may be concerned about extended lead times, supply chain headwinds, and their capacity investments
  • Specifically, management may have concerns about extended lead times for their products, supply chain headwinds, and the pandemic’s impact on their revenues. Moreover, they may lack confidence in their ability to sustain market share gains, meet their inventory days targets, and increase capacity expansion investments in the short run. Finally, management may be overstating their manufacturing technology capabilities and they may have concerns about the off-the-shelf availability of their products and the sustainability of Enterprise systems growth