Taiwan Semiconductor (TSM) Stock Gains on May Sales Increase

NEW YORK (TheStreet) -- Taiwan Semiconductor (TSM) shares are up 1.7% to $23.22 in afternoon trading on Wednesday after the company reported a 15.4% year over year increase in May sales to NT$70.16 billion (US$2.26 billion).

The total was the lowest the company has reported since February when it reported NT$62.65 billion in revenue.

Despite the year over year gains, the company experienced a 7% month to month decline in sales.

At its annual general meeting yesterday, the company said that it expects revenue growth to slow this year to 14% from last year's pace of 28% growth, according to Reuters.

The world's largest chipmaker's revenue was helped in 2014 by its contract to supply Apple (AAPL) iPhone microchips. However, the company is expected to lose some of that business to Samsung Electronics (SSNLF) this year.

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 robust revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, solid stock price performance and impressive record of earnings per share growth. 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:

  • The revenue growth greatly exceeded the industry average of 0.6%. Since the same quarter one year prior, revenues rose by 46.0%. 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 0.21 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.30, which clearly demonstrates the ability to cover short-term cash needs.
  • 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. When 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 the industry average and significantly exceeds that of the S&P 500.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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.
  • TAIWAN SEMICONDUCTOR MFG CO reported significant earnings per share improvement 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 $1.61 versus $1.18 in the prior year. This year, the market expects an improvement in earnings ($1.83 versus $1.61).
  • You can view the full analysis from the report here: TSM Ratings Report

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