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 revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, expanding profit margins and good cash flow from operations. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

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Highlights from the ratings report include:
  • TSM's very impressive revenue growth greatly exceeded the industry average of 3.5%. Since the same quarter one year prior, revenues leaped by 60.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • TSM's debt-to-equity ratio is very low at 0.16 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, TSM has a quick ratio of 1.73, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Powered by its strong earnings growth of 94.11% and other important driving factors, this stock has surged by 32.02% over the past year, outperforming the rise in the S&P 500 Index during the same period. 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 73.40%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 34.80% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 69.56% to $2,690.50 million when compared to the same quarter last year. In addition, TAIWAN SEMICONDUCTOR MFG CO has also vastly surpassed the industry average cash flow growth rate of -7.95%.

Taiwan Semiconductor Manufacturing Company Limited engages in manufacturing, selling, packaging, testing, and computer-aided design of integrated circuits and other semiconductor devices. Taiwan Semiconductor has a market cap of $94.72 billion and is part of the technology sector and electronics industry. The company has a P/E ratio of 21.2, above the S&P 500 P/E ratio of 17.7. Shares are up 5.8% year to date as of the close of trading on Thursday.

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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