Answering the question of which is the better buy, Texas Instruments (NASDAQ:TXN) or Intel (NASDAQ:INTC), is a pleasantly difficult chore. Both Texas Instruments and Intel have rewarded shareholders handsomely in the past year, and for similar reasons.

Texas Instruments has long since shed its image as a manufacturer of calculators and similar devices to become the leading analog and embedded processor provider on the planet. Intel, once known almost exclusively for its PC chips, has reinvented itself as well. It is now a cloud data center, Internet of Things (IoT) company -- a market that Texas Instruments is also making headway in -- and memory solutions provider.

So, which is the better buy? Both are solid growth and income alternatives, but one gets the ever-so-slight nod.

Close-up picture of a computer processor.

Image source: Getty Images.

The case for Texas Instruments

Though its stock slipped a notch following last quarter's earnings news, Texas Instruments' fiscal third quarter of 2017 was nothing short of spectacular. The $4.12 billion Texas Instruments reported was an impressive 12% jump compared to a year ago.

Texas Instruments really hit a home run where it counts -- its embedded processors and analog units. Analog sales, handily Texas Instruments' largest division, soared 16% to $2.7 billion and, thanks in large part to strict management of expenses, the division's operating profit rose 32% to $1.27 billion.

Embedded processing sales increased 17% to $931 million, and operating profit skyrocketed 45% to $325 million. Other revenue sank 13% to $487 million, but that's becoming a nonfactor as Texas Instruments focuses its efforts on analog and embedded processors for the billions of devices all around us.

Though cost of revenue was up 5% to $1.46 billion, operating expenses were flat, which helped boost earnings per share (EPS) a whopping 29% to $1.26, obliterating last year's $0.98 a share. Based on guidance for the current quarter of $3.57 billion to $3.87 billion, Texas Instruments is expecting yet another blowout period.

Similar to Intel, Texas Instruments also pays its shareholders a solid dividend of 1.9%, up 24% since the board authorized a 24% jump in payout in September. The only fly in the ointment is Texas Instruments' valuation. Though not necessarily high, by most metrics Texas Instruments' stock is priced at, or above, its peers.

Picture of Intel's 3D cameras at a baseball park in San Diego.

Image source: Intel.

The case for Intel

The top line isn't growing quite as fast as Texas Instruments', but Intel has nothing to apologize for. Total revenue climbed 6% to $16.1 billion in the third quarter as most every Intel unit took another step in the right direction. There was a time that stagnant PC-related revenue would have sunk Intel -- not today.

Last quarter's PC sales of $8.9 billion were flat year over year, but Intel's new-ish focus on cloud data centers, IoT, and memory solutions easily picked up the slack. The self-proclaimed "data center first" provider reported a 7% rise in cloud data center sales to $4.9 billion. Intel's IoT unit revenue of $849 million was a stellar 23% improvement over last year.

Intel's strong data center revenue was dwarfed, on a percentage basis, by the 37% jump in memory solutions sales to $891 million. Programmable solutions, a component of IoT, generated $469 million in revenue, good for a 10% gain year over year. Combined, Intel's non-PC divisions generated $7.1 billion in sales last quarter, equal to 44% of total revenue, a figure that's growing each quarter.

Similar to Texas Instruments, Intel was able to grow its top line while keeping a handle on spending. Operating expenses declined 10.5%, last quarter, which improved EPS an eye-popping 35% to $0.94 a share.

The envelope, please

As you may have gathered, I'm bullish on both Texas Instruments and Intel. They are each growing where it counts and are positioned to do so for years to come. The deciding factors between the two stocks are Intel's higher dividend yield of 2.4% and valuations.

At a mere 15.7 times trailing earnings compared to its peer average of 26, and just 14 times forward expectations, Intel has the added benefit of being a growth, income, and value investor's dream stock. Texas Instruments and its 25.5 times earnings valuation is hardly expensive, but for investors who appreciate a bargain, Intel has the edge.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.