Better Buy: NXP Semiconductors vs. Texas Instruments
Investors with an interest in the semiconductor industry often find themselves weighing Texas Instruments (NASDAQ: TXN) against NXP Semiconductors (NASDAQ: NXPI). The two enormous chipmakers have a lot in common, competing head-to-head in several key markets and running very similar hybrid manufacturing models. So which one is the better investment right now?
Once upon a time, the main tiebreaker between these two stocks lay in their valuation. NXP traded at the bargain-bin ratio of 10 times forward earnings last spring, making it a no-brainer bargain of an investment. At the time, Texas Instruments shares were changing hands at 20 times forward earnings. For P/E purists, there was just no reason to consider TI over NXP.
Things have changed since then, but perhaps not to a game-changing degree. NXP investors pocketed a 74% return in 2019, while TI's shareholders had to settle for a (still market-beating) gain of 36%. Today, NXP's stock trades at 15 times forward earnings and 24 times free cash flows, while Texas Instrument's valuation ratios stand at 26 times forward earnings and 39 times free cash flows.
Source Fool.com
