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Taiwan Semiconductor Manufacturing Stock Buy Recommendation Reiterated (TSM)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK (TheStreet) -- Taiwan Semiconductor Manufacturing (NYSE:TSM) has been reiterated by TheStreet Ratings as a buy with a ratings score of B . The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income, revenue growth, expanding profit margins and good cash flow from operations. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the ratings report include:

  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry average. The net income increased by 9.2% when compared to the same quarter one year prior, going from $1,274.85 million to $1,391.70 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 13.5%. Since the same quarter one year prior, revenues slightly increased by 8.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The gross profit margin for TAIWAN SEMICONDUCTOR MFG CO is currently very high, coming in at 74.00%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 32.70% significantly outperformed against the industry average.
  • Net operating cash flow has slightly increased to $2,328.59 million or 4.36% when compared to the same quarter last year. Despite an increase in cash flow, TAIWAN SEMICONDUCTOR MFG CO's cash flow growth rate is still lower than the industry average growth rate of 23.99%.

Taiwan Semiconductor Manufacturing Company Limited engages in the computer-aided designing, manufacturing, packaging, testing, and selling integrated circuits and other semiconductor devices; and manufacturing masks. The company has a P/E ratio of 17.1, equal to the average electronics industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Taiwan Semiconductor has a market cap of $76.21 billion and is part of the technology sector and electronics industry. Shares are up 13.9% year to date as of the close of trading on Friday.

You can view the full Taiwan Semiconductor Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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