Stock Analysis on Net

Texas Instruments Inc. (NASDAQ:TXN)

$24.99

Economic Value Added (EVA)

Microsoft Excel

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Economic Profit

Texas Instruments Inc., economic profit calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Net operating profit after taxes (NOPAT)1
Cost of capital2
Invested capital3
 
Economic profit4

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= × =


The financial data over the five-year period reveals several notable trends and changes in key performance metrics.

Net Operating Profit After Taxes (NOPAT)
NOPAT shows a rising trend from 2020 through 2022, increasing from $5,637 million to a peak of $8,736 million in 2022. However, this is followed by a decline in the subsequent years, reaching $6,512 million in 2023 and further dropping to $5,023 million in 2024. This pattern indicates initial strong profitability growth, which diminishes notably in the last two years.
Cost of Capital
The cost of capital remains relatively stable throughout the period, fluctuating slightly between 13.62% and 13.89%. The marginal downward trend from 13.86% in 2020 to 13.62% in 2024 suggests a slight reduction in financing costs or perceived investment risk.
Invested Capital
Invested capital consistently increases every year, starting at $12,963 million in 2020 and rising sharply to $26,167 million by 2024. The growth rate accelerates notably after 2022, indicating significant additional investments or asset acquisitions, which could imply expansion or scaling of operations.
Economic Profit
Economic profit exhibits a rising trend from 2020 ($3,840 million) through 2022 ($6,297 million), reflecting growing value creation. Similar to NOPAT, economic profit declines markedly afterward, decreasing to $3,434 million in 2023 and further down to $1,459 million in 2024. The decline suggests that despite increased invested capital, the returns generated have lowered relative to the cost of capital, diminishing overall economic value added in recent years.

In summary, the data reflect a trajectory of growth in profitability and value creation until 2022, followed by a downturn in earnings and economic profit in the last two years. Simultaneously, invested capital has expanded significantly, potentially pointing to higher capital intensity or strategic investments that have yet to translate into proportional profit increases. The stable cost of capital indicates that changes in financial expenses are unlikely the cause of the reduced economic profit. This trend warrants close examination of operational efficiency and capital deployment effectiveness going forward.


Net Operating Profit after Taxes (NOPAT)

Texas Instruments Inc., NOPAT calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Net income
Deferred income tax expense (benefit)1
Increase (decrease) in accounts receivable allowances2
Increase (decrease) in accrued restructuring3
Increase (decrease) in equity equivalents4
Interest and debt expense
Interest expense, operating lease liability5
Adjusted interest and debt expense
Tax benefit of interest and debt expense6
Adjusted interest and debt expense, after taxes7
Net operating profit after taxes (NOPAT)

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in accounts receivable allowances.

3 Addition of increase (decrease) in accrued restructuring.

4 Addition of increase (decrease) in equity equivalents to net income.

5 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =

6 2024 Calculation
Tax benefit of interest and debt expense = Adjusted interest and debt expense × Statutory income tax rate
= × 21.00% =

7 Addition of after taxes interest expense to net income.


The financial data reveals several notable trends related to the company's profitability over the five-year period.

Net Income

Net income displayed a positive trajectory from 2020 through 2022, increasing substantially from 5,595 million US dollars in 2020 to a peak of 8,749 million US dollars in 2022. However, subsequent years show a decline, with net income falling to 6,510 million US dollars in 2023 and further decreasing to 4,799 million US dollars in 2024. This suggests a period of growth followed by a contraction in profitability.

Net Operating Profit After Taxes (NOPAT)

Similar to net income, NOPAT increased steadily from 5,637 million US dollars in 2020 to a high of 8,736 million US dollars in 2022. Following this peak, a decline is observed, with NOPAT dropping to 6,512 million US dollars in 2023 and further to 5,023 million US dollars in 2024. The close alignment between NOPAT and net income values over the period indicates consistent tax impact and operational profitability trends.

Overall, the data indicates that the company experienced strong profitability growth leading up to 2022, with both net income and NOPAT reaching their highest levels. The two years following 2022 show a marked decrease in profitability, reflecting potential operational challenges, market conditions, or other factors impacting earnings. The similarity in the pattern and values of net income and NOPAT further confirms that operational efficiency and tax effects have moved in tandem during this timeframe.


Cash Operating Taxes

Texas Instruments Inc., cash operating taxes calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Provision for income taxes
Less: Deferred income tax expense (benefit)
Add: Tax savings from interest and debt expense
Cash operating taxes

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).


Provision for Income Taxes
The provision for income taxes increased significantly from 2020 to 2022, rising from 422 million US dollars to 1,283 million US dollars. This represents a substantial increase over the two-year period. However, after peaking in 2022, the provision declined notably in the subsequent years, decreasing to 908 million in 2023 and further down to 654 million in 2024. The trend indicates a strong growth phase followed by a marked reduction in tax provision amounts.
Cash Operating Taxes
Cash operating taxes followed a broadly similar pattern to the provision for income taxes but with consistently higher absolute values. From 601 million US dollars in 2020, cash operating taxes increased steadily to reach a peak of 1,521 million in 2022. Following this peak, there was a decrease to 1,286 million in 2023 and a further decline to 978 million in 2024. While the pattern indicates growth in cash operating tax payments until 2022, it also shows a decline in the subsequent two years, although the reduction is less pronounced compared to the provision for income taxes.
Overall Observations
Both provision for income taxes and cash operating taxes exhibit a strong upward trend during the first three years, suggesting increasing taxable income or changes in tax rates or regulations leading to higher tax liabilities. The subsequent decrease in both metrics after 2022 might point to improved tax planning, changes in financial results, or other strategic decisions impacting tax expenses. The consistently higher cash operating taxes compared to provisions reflect the timing differences typically observed between tax payments and tax expense accounting.

Invested Capital

Texas Instruments Inc., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Current portion of long-term debt
Long-term debt, excluding current portion
Operating lease liability1
Total reported debt & leases
Stockholders’ equity
Net deferred tax (assets) liabilities2
Accounts receivable allowances3
Accrued restructuring4
Equity equivalents5
Accumulated other comprehensive (income) loss, net of tax6
Adjusted stockholders’ equity
Investments measured at fair value7
Invested capital

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 Addition of capitalized operating leases.

2 Elimination of deferred taxes from assets and liabilities. See details »

3 Addition of allowance for doubtful accounts receivable.

4 Addition of accrued restructuring.

5 Addition of equity equivalents to stockholders’ equity.

6 Removal of accumulated other comprehensive income.

7 Subtraction of investments measured at fair value.


The financial data reveals several key trends in the company's capital structure over the five-year period from 2020 to 2024.

Total Reported Debt & Leases
The total reported debt and leases increased steadily each year, rising from $7,119 million in 2020 to $14,377 million in 2024. This represents a doubling in the debt level over the observed timeframe, with a particularly notable jump between 2022 and 2023. The increasing leverage indicates a growing reliance on borrowed capital.
Stockholders’ Equity
Stockholders’ equity also increased annually, moving from $9,187 million in 2020 to $16,903 million in 2024. The growth was most significant from 2020 to 2021 and remained relatively steady thereafter. The rise in equity suggests the company retained earnings or issued new equity, strengthening the net asset base.
Invested Capital
Invested capital grew from $12,963 million in 2020 to $26,167 million in 2024, essentially doubling in size. The increase accelerated notably in 2023 and 2024, aligning with the rise in both debt and equity. This combined growth reflects an expansion in the company’s overall capital employed in the business, indicating potential asset growth or investments in operations.

Overall, the trends illustrate a strategy of expanding investment supported by both increasing equity and notably growing debt levels. The balance between debt and equity growth suggests active capital management aimed at scaling the business, though the rise in leverage may warrant monitoring for financial risk considerations.


Cost of Capital

Texas Instruments Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt, including current portion3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2024-12-31).

1 US$ in millions

2 Equity. See details »

3 Long-term debt, including current portion. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt, including current portion3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2023-12-31).

1 US$ in millions

2 Equity. See details »

3 Long-term debt, including current portion. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt, including current portion3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2022-12-31).

1 US$ in millions

2 Equity. See details »

3 Long-term debt, including current portion. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt, including current portion3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2021-12-31).

1 US$ in millions

2 Equity. See details »

3 Long-term debt, including current portion. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt, including current portion3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2020-12-31).

1 US$ in millions

2 Equity. See details »

3 Long-term debt, including current portion. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Texas Instruments Inc., economic spread ratio calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Selected Financial Data (US$ in millions)
Economic profit1
Invested capital2
Performance Ratio
Economic spread ratio3
Benchmarks
Economic Spread Ratio, Competitors4
Advanced Micro Devices Inc.
Analog Devices Inc.
Applied Materials Inc.
Broadcom Inc.
Intel Corp.
KLA Corp.
Lam Research Corp.
Micron Technology Inc.
NVIDIA Corp.
Qualcomm Inc.

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 Economic profit. See details »

2 Invested capital. See details »

3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =

4 Click competitor name to see calculations.


Economic Profit
The economic profit experienced a rising trend from 2020 to 2022, increasing from 3,840 million US dollars in 2020 to a peak of 6,297 million US dollars in 2022. After this peak, there was a notable decline, with economic profit decreasing to 3,434 million US dollars in 2023 and further dropping to 1,459 million US dollars in 2024.
Invested Capital
The invested capital showed a consistent upward trend throughout the entire period. Starting at 12,963 million US dollars in 2020, it increased steadily each year, reaching 26,167 million US dollars by the end of 2024. This indicates continuous capital deployment and expansion of the asset base over the analyzed years.
Economic Spread Ratio
The economic spread ratio followed a similar pattern to economic profit, rising from 29.62% in 2020 to a high of 35.86% in 2022. Following 2022, the ratio declined sharply, falling to 15.2% in 2023 and further diminishing to 5.57% in 2024. This suggests a significant reduction in the spread between the return on invested capital and the cost of capital during the latter years.

In summary, while invested capital steadily increased over the five-year period, both economic profit and the economic spread ratio peaked in 2022 before experiencing substantial declines in the subsequent two years. The data reflects an environment of capital expansion accompanied by decreasing profitability and margin over the most recent years analyzed.


Economic Profit Margin

Texas Instruments Inc., economic profit margin calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Selected Financial Data (US$ in millions)
Economic profit1
Revenue
Performance Ratio
Economic profit margin2
Benchmarks
Economic Profit Margin, Competitors3
Advanced Micro Devices Inc.
Analog Devices Inc.
Applied Materials Inc.
Broadcom Inc.
Intel Corp.
KLA Corp.
Lam Research Corp.
Micron Technology Inc.
NVIDIA Corp.
Qualcomm Inc.

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 Economic profit. See details »

2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenue
= 100 × ÷ =

3 Click competitor name to see calculations.


The financial data over the five-year period reveals several notable trends and changes in the key performance indicators.

Economic Profit
Economic profit increased significantly from 3,840 million US dollars in 2020 to a peak of 6,297 million US dollars in 2022. However, a sharp decline followed in the subsequent years, dropping to 3,434 million in 2023 and further declining to 1,459 million in 2024. This indicates a weakening in the company's ability to generate profit above its cost of capital after 2022.
Revenue
Revenue showed a consistent upward trend from 14,461 million US dollars in 2020 to 20,028 million in 2022. After reaching this peak, revenue declined to 17,519 million in 2023 and further decreased to 15,641 million in 2024. This suggests that the company faced a downturn in sales or demand after 2022, impacting overall income.
Economic Profit Margin
The economic profit margin followed a similar pattern to economic profit, increasing from 26.55% in 2020 to a peak of 31.44% in 2022, reflecting improved profitability relative to revenue. From 2023 onwards, the margin decreased sharply to 19.6% and then to 9.33% by 2024. This decline indicates a reduction in profitability efficiency, possibly due to increased costs, lower revenue, or reduced operational leverage.

In summary, the data points to a period of growth and improved profitability culminating in 2022, followed by a notable contraction in both revenue and economic profit, along with a significant erosion of profit margins. These trends highlight challenges in sustaining growth and profitability beyond 2022, which may warrant further investigation into operational factors or external market conditions affecting performance.