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 robust revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, 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:
  • The revenue growth greatly exceeded the industry average of 17.0%. Since the same quarter one year prior, revenues rose by 31.3%. 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 0.16 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 1.43, which illustrates the ability to avoid short-term cash problems.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, TAIWAN SEMICONDUCTOR MFG CO's return on equity exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for TAIWAN SEMICONDUCTOR MFG CO is currently very high, coming in at 74.70%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 31.69% significantly outperformed against the industry average.
  • Net operating cash flow has increased to $2,997.59 million or 22.83% 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 -56.72%.

Taiwan Semiconductor Manufacturing Company Limited engages in the computer-aided design, manufacture, packaging, testing, sale, and marketing of integrated circuits and other semiconductor devices. Taiwan Semiconductor has a market cap of $93.0 billion and is part of the technology sector and electronics industry. The company has a P/E ratio of 17.00, below the S&P 500 P/E ratio of 18.00. Shares are up 9.6% 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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