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 A+ . The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and expanding profit margins. 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 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 $1,391.69 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 13.6%. 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.
  • TSM's debt-to-equity ratio is very low at 0.11 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.15, which illustrates the ability to avoid short-term cash problems.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 26.72% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, TSM should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The gross profit margin for TAIWAN SEMICONDUCTOR MFG CO is currently very high, coming in at 74.10%. 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.

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 17.6, above the average electronics industry P/E ratio of 17.1 and below the S&P 500 P/E ratio of 17.7. Taiwan Semiconductor has a market cap of $78.38 billion and is part of the technology sector and electronics industry. Shares are up 18.4% year to date as of the close of trading on Monday.

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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