A great buy and holdTexas Instruments is a semi conductor manufacturer that appears to have attractive growth prospects within the forecasted high growth semi conductor sector or investment theme.
Stats
The average free cash flow over the last 10 years is 29.9% with an annual dividend yield of 2.27%.
Growth in annual revenue over the last 10 years has been modest.
On average total operating expenses has seen a modest declined since 2006.
As the revenue has grown and operating expenses has declined, the margins at face value has increased. One can see this by the growth in annual gross profit.
What about the debt?
long-term debt to total assets ratio is at 0.34 or 34%. The standard debt to asset ratio is 0.37% which means that most of the debt is long term debt. The effective interest on the total debt is less than 3%. So no real problem or red flags there.
The company is however taking on more debt compared to its historical position. This isn't necessarily a bad thing provided that it is well managed and reinvested into the company. I don't like companies that take on more debt and pay high dividend yields. That's just a personal view.
With regards to the price per share. The company may be trading at a fair value based on traditional metrics and on some metrics such as price to book, it looks expensive. With a 5 year view, i think the company could be in a really good position to continue to grow its revenue particularly if you reinvest the dividends over time.
The trading signals on the weekly chart show mixed results. The Demarker and Stochastic Momentum Indicator suggest that the price may need to consolidate for a while or even retrace before it sees another upward leg. The Stochastic Relative Strength Index shows that the price may increase in the short term, however, this may be suggesting that the price may break through the 185 or 190 mark before retracing to the 160 area. This is all short term guesses.
The question is, should one buy and hold at the current price or wait for a retracement? My feeling is that it shouldn't matter to much if you are looking to hold the company for the next 5 years or more.
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