Taiwan Semiconductor Manufacturing (TSM) Is Today's Dead Cat Bounce Stock

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.

Trade-Ideas LLC identified Taiwan Semiconductor Manufacturing ( TSM) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Taiwan Semiconductor Manufacturing as such a stock due to the following factors:

  • TSM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $272.0 million.
  • TSM has traded 546,524 shares today.
  • TSM is up 3.3% today.
  • TSM was down 5.3% yesterday.

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More details on TSM:

Taiwan Semiconductor Manufacturing Company Limited engages in the computer-aided design, manufacture, packaging, testing, sale, and marketing of integrated circuits and other semiconductor devices. The stock currently has a dividend yield of 4.1%. TSM has a PE ratio of 2. Currently there is 1 analyst that rates Taiwan Semiconductor Manufacturing a buy, 2 analysts rate it a sell, and 1 rates it a hold.

The average volume for Taiwan Semiconductor Manufacturing has been 12.6 million shares per day over the past 30 days. Taiwan Semiconductor has a market cap of $124.9 billion and is part of the technology sector and electronics industry. Shares are up 5.6% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Taiwan Semiconductor Manufacturing as a buy. 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 ratings report include:
  • The revenue growth greatly exceeded the industry average of 5.0%. 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.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. 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).

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