Texas Instruments Incorporated (TXN) Is a Trending Stock: Facts to Know Before Betting on It

Texas Instruments (TXN) is one of the stocks most watched by Zacks.com visitors lately. So, it might be a good idea to review some of the factors that might affect the near-term performance of the stock.Over the past month, shares of this chipmaker have returned -5.6%, compared to the Zacks S&P 500 composite's +4.2% change. During this period, the Zacks Semiconductor - General industry, which Texas Instruments falls in, has lost 1.8%. The key question now is: What could be the stock's future direction?While media releases or rumors about a substantial change in a company's business prospects usually make its stock 'trending' and lead to an immediate price change, there are always some fundamental facts that eventually dominate the buy-and-hold decision-making.Revisions to Earnings EstimatesHere at Zacks, we prioritize appraising the change in the projection of a company's future earnings over anything else. That's because we believe the present value of its future stream of earnings is what determines the fair value for its stock.We essentially look at how sell-side analysts covering the stock are revising their earnings estimates to reflect the impact of the latest business trends. And if earnings estimates go up for a company, the fair value for its stock goes up. A higher fair value than the current market price drives investors' interest in buying the stock, leading to its price moving higher. This is why empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.For the current quarter, Texas Instruments is expected to post earnings of $1.06 per share, indicating a change of -11.7% from the year-ago quarter. The Zacks Consensus Estimate has changed -9.1% over the last 30 days.For the current fiscal year, the consensus earnings estimate of $5.35 points to a change of +2.9% from the prior year. Over the last 30 days, this estimate has changed -6.5%.For the next fiscal year, the consensus earnings estimate of $6.44 indicates a change of +20.5% from what Texas Instruments is expected to report a year ago. Over the past month, the estimate has changed -5.2%.Having a strong externally audited track record, our proprietary stock rating tool, the Zacks Rank, offers a more conclusive picture of a stock's price direction in the near term, since it effectively harnesses the power of earnings estimate revisions. Due to the size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, Texas Instruments is rated Zacks Rank #4 (Sell).The chart below shows the evolution of the company's forward 12-month consensus EPS estimate:12 Month EPSProjected Revenue GrowthWhile earnings growth is arguably the most superior indicator of a company's financial health, nothing happens as such if a business isn't able to grow its revenues. After all, it's nearly impossible for a company to increase its earnings for an extended period without increasing its revenues. So, it's important to know a company's potential revenue growth.For Texas Instruments, the consensus sales estimate for the current quarter of $3.91 billion indicates a year-over-year change of +6.7%. For the current and next fiscal years, $17.05 billion and $18.89 billion estimates indicate +9% and +10.8% changes, respectively.Last Reported Results and Surprise HistoryTexas Instruments reported revenues of $4.01 billion in the last reported quarter, representing a year-over-year change of -1.7%. EPS of $1.30 for the same period compares with $1.49 a year ago.Compared to the Zacks Consensus Estimate of $3.86 billion, the reported revenues represent a surprise of +3.87%. The EPS surprise was +9.24%.The company beat consensus EPS estimates in each of the trailing four quarters. The company topped consensus revenue estimates each time over this period.ValuationNo investment decision can be efficient without considering a stock's valuation. Whether a stock's current price rightly reflects the intrinsic value of the underlying business and the company's growth prospects is an essential determinant of its future price performance.While comparing the current values of a company's valuation multiples, such as price-to-earnings (P/E), price-to-sales (P/S) and price-to-cash flow (P/CF), with its own historical values helps determine whether its stock is fairly valued, overvalued, or undervalued, comparing the company relative to its peers on these parameters gives a good sense of the reasonability of the stock's price.The Zacks Value Style Score (part of the Zacks Style Scores system), which pays close attention to both traditional and unconventional valuation metrics to grade stocks from A to F (an An is better than a B; a B is better than a C; and so on), is pretty helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.Texas Instruments is graded F on this front, indicating that it is trading at a premium to its peers. Click here to see the values of some of the valuation metrics that have driven this grade.Bottom LineThe facts discussed here and much other information on Zacks.com might help determine whether or not it's worthwhile paying attention to the market buzz about Texas Instruments. However, its Zacks Rank #4 does suggest that it may underperform the broader market in the near term.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 256 positions with double- and triple-digit gains in 2024 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Texas Instruments Incorporated (TXN): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks