Why Taiwan Semiconductor Manufacturing Company (TSM) Is Still A 'Buy'

NEW YORK (TheStreet) --TheStreet Ratings team reiterated its "buy" rating for Taiwan Semiconductor Manufacturing Company (TSM), with a ratings score of A+.

Shares of TSMC were gaining 2.9% to $21.27 Tuesday.

More than 15.1 million shares of TSMC changed hands by 2:50 p.m., above the average daily trading volume of 11.8 million. Shares of the chip manufacturer gained 5.3% in the past month, and are up 20.5% since the start of 2014.

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TheStreet Ratings team rates TAIWAN SEMICONDUCTOR MFG CO as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

"We rate TAIWAN SEMICONDUCTOR MFG CO (TSM) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. 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, growth in earnings per share, good cash flow from operations and increase in stock price during the past year. 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 analysis by TheStreet Ratings Team goes as follows:

  • TSM's revenue growth has slightly outpaced the industry average of 3.1%. Since the same quarter one year prior, revenues slightly increased by 9.3%. 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 0.24 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 1.77, which demonstrates the ability of the company to cover short-term liquidity needs.
  • TAIWAN SEMICONDUCTOR MFG CO has improved earnings per share by 15.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, TAIWAN SEMICONDUCTOR MFG CO increased its bottom line by earning $1.18 versus $1.10 in the prior year. This year, the market expects an improvement in earnings ($1.46 versus $1.18).
  • Net operating cash flow has increased to $3,115.27 million or 26.22% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 3.25%.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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.
  • You can view the full analysis from the report here: TSM Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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