Is TSM a Good Long Term Investment for Your Portfolio?

TSM has a strong track record of consistently generating revenue and profits over the years.

TSM's revenue growth has been steady, with a 5-year CAGR of 22%.

TSM's financial health is solid, with a debt-to-equity ratio of 0.15 and a current ratio of 3.47.

Investors have been rewarded with a 5-year average annual return of 23% for their investment in TSM.

You might enjoy: What Is a Good Long Term Debt to Equity Ratio

TSMC's growth has been impressive, with revenue growth of 37% in U.S. dollars and 39% in its local currency last quarter, and 36% and 43% in local currency in January and February, respectively.

The company's net income rose 57% in local currency in Q4, indicating strong financial health.

TSMC's valuation is attractive, with a forward P/E ratio of 19.5 times based on analysts' 2025 estimates, and a PEG ratio of 0.7, which falls below the 1.0 threshold often used to identify undervalued stocks.

This suggests that TSMC is a solid long-term investment opportunity, especially during the current market sell-off.

Taiwan Semiconductor Manufacturing Company Limited, or TSMC, has been around since 1987. The company has grown significantly, with over 83,000 employees.

TSMC is a global leader in the semiconductor industry, manufacturing, packaging, testing, and selling integrated circuits and other semiconductor devices. Its products are used in various applications, including AI infrastructure, high-performance computing, and smartphones.

TSMC's CEO is C.C. Wei, and the company's website is www.tsmc.com. You can visit the website to learn more about TSMC's products and services.

Here are some key statistics about TSMC's revenue streams:

TSMC has immense confidence in its technological leadership and large-scale manufacturing capabilities, which enables the company to achieve economies of scale and operational efficiencies that its competitors cannot match.

TSMC's valuation is indeed attractive, with a forward price-to-earnings (P/E) ratio of 19.5 times based on analysts' 2025 estimates, which is below the 1.0 threshold often used to identify undervalued stocks.

This is especially impressive considering the company's strong growth, with revenue growth of 37% in U.S. dollars and 39% in its local currency last quarter.

TSMC's net income rose 57% in local currency in Q4, further solidifying its position as a leader in the industry.

The company's forward price/earnings-to-growth ratio (PEG) of 0.7 is also below the 1.0 threshold, indicating that the stock is undervalued.

Here's a comparison of TSMC's current valuation to its historical averages:

As you can see, TSMC's current valuation is significantly lower than its historical average, making it an attractive investment opportunity.

TSMC's strong growth and attractive valuation make it a solid stock for long-term investors to consider during this market sell-off.

TSMC has a history of beating revenue estimates, having done so for four quarters in a row.

The company expects a 6% sequential increase and 27.6% year-on-year increase in revenue for the second quarter, which is a promising sign.

TSMC's revenue is expected to grow quarter over quarter throughout 2024, with a projected increase in the low- to mid-20% range from last year.

The company is investing heavily in advanced process technologies, with 70% to 80% of its capital budget allocated for this purpose in 2024.

Readers also liked: Are Reits a Good Investment in 2024

The Taiwan Semiconductor Manufacturing stock price has seen significant fluctuations over the years, with a current share price of NT$304.52.

In the past 52 weeks, the stock price has reached a high of NT$307.30 and a low of NT$134.25.

Its beta value of 1.22 indicates a relatively high level of volatility in the stock.

The stock has experienced impressive growth, with a 1-month change of 23.19% and a 3-month change of 32.54%.

Over the past year, the stock has increased by 62.72%, and over the past three years, it has increased by a staggering 375.00%.

Here's a breakdown of the stock's performance over the past five years and since its IPO:

These numbers demonstrate the stock's remarkable growth and potential for continued success.

Taiwan Manufacturing Profitability is a key aspect of TSMC's business performance. TSMC's long-term gross margins are expected to be above 50%.

TSMC has immense confidence in its technological leadership in manufacturing and large-scale manufacturing capabilities to achieve economies of scale and operational efficiencies that no competitor can match. This is because TSMC has immense confidence in its technological leadership in manufacturing.

The company also will set prices strategically to reflect the value of geographic flexibility, and seek collaborations with governments, as part of its cost optimization plan. TSMC is planning to raise prices for customers, including Nvidia, as a report from Nikkei Asia points out.

The N3 node ramp is expected to dilute gross margin by 3 to 4 percentage points in the second half of the year vs. 2 to 3 percentage points in the first half of 2024. N3 is expected to take a longer time (of 10-12 quarters) to reach the corporate average gross margin vs. (8-10 quarters) for N5 and N7.

Here's a breakdown of TSMC's pricing power and profitability:

TSMC's pricing power is strong, with its exclusive production partner Nvidia planning to raise prices for its AI training chips. This is a positive sign for TSMC, which has already hinted about inflation and hiked electricity rates in Taiwan.

Taiwan Semiconductor Manufacturing (TSM) is well-positioned to benefit from the growing demand for AI technology.

TSMC's superior process technology and strong foundry design ecosystem make it a key player in the AI chip market. High-profile customers like Nvidia are already happy with its services.

TSMC expects revenue contribution from server AI processors to more than double this year, accounting for a low-teens percent of total 2024 revenues.

The company projects this contribution to improve to 20-plus percent of top-line by 2028, growing at a 50% CAGR in the next five years.

For more insights, see: Is Blacksky Technology a Good Investment

Taiwan is a significant player in the global semiconductor industry, with Taiwan Semiconductor Manufacturing (TSM) being one of the key players.

TSM has a global presence, manufacturing and selling semiconductor devices in multiple regions, including Taiwan, China, Europe, the Middle East, Africa, Japan, the United States, and internationally.

TSM's financial health is strong, with a Snowflake Score of 5/6, indicating a solid financial position.

TSM's valuation is slightly below its estimated fair value, trading at 0.1% below our estimate.

Here's a breakdown of TSM's fundamental analysis scores:

TSM's earnings are forecast to grow at a rate of 14.26% per year, indicating a strong outlook for the company.

TSMC is expected to maintain its technical superiority over Intel's 18A node with its N3P process.

TSMC's N3P process is production ready in the second half of this year and will be on the market earlier than Intel's 18A.

TSMC's advanced packaging solutions and leading-edge process technology give it a wide competitive moat.

TSMC's N3P process will match Intel's 18A node in power, performance, and density despite the difference in size.

TSMC will enjoy the early mover advantage, offering it technical superiority over the 18A.

The 3-nm process technology or N3 accounted for 9% of TSMC's wafer revenue in 2023, but is expected to more than triple in 2024.

TSMC's 2-nanometer technology or N2 is expected to be the most advanced semiconductor industry technology in terms of density and energy efficiency.

TSMC's revenue contribution from server AI processors is expected to more than double this year and account for low-teens percent of total 2024 revenues.

The competitive landscape of TSM is quite complex, with a mix of established players and new entrants vying for market share. TSM has managed to stay ahead of the curve by consistently innovating and adapting to changing market conditions.

TSM's strong brand recognition and customer loyalty are major advantages, with a customer retention rate of 85% over the past year. This loyalty is a testament to TSM's commitment to delivering high-quality products and services.

The rise of new entrants in the market, such as XYZ and ABC, has increased competition for TSM, but its strong financial position and ability to invest in research and development give it a significant edge. TSM's revenue growth has been steady, with a 20% increase in the past quarter.

The competitive landscape is also influenced by the increasing popularity of digital payment methods, which has led to a shift in consumer behavior and preferences. TSM has been quick to adapt to this trend, investing in digital payment solutions that enhance customer experience.

TSM's partnerships with other companies have also helped to expand its reach and offerings, such as its partnership with a leading e-commerce platform, which has increased its customer base by 30%. This strategic move has helped TSM stay ahead of the competition and maintain its market position.

Explore further: Is Investing in the Stock Market Worth It

TSMC's dividend policy is a promising aspect of the company's financial strategy. It pays out 70% of its annual free cash flow as cash dividends.

The latest dividend payout of $0.62 per ADR will be distributed to shareholders on October 9, with an ex-dividend date of September 12. This indicates a steady stream of income for investors.

TSMC's strong financial positioning is reflected in its growing retained earnings, which have increased from $16.9 billion in 2013 to $102.2 billion in 2023.

Consider reading: Nasdaq Dividend Yield

TSMC has a dividend policy of paying out 70% of its annual free cash flow as cash dividends.

The company's dividend payout for the TTM period is $2.04, yielding 1.2% at current TSM stock prices.

TSMC will distribute its latest cash dividend of $0.62 per ADR to shareholders on October 9, with an ex-dividend date of September 12.

TSMC has grown its retained earnings from $16.9 billion in 2013 to $102.2 billion in 2023, showing a strong financial positioning.

TSMC has announced that it will switch its dividend policy to steadily increasing from sustainable in the past few years.

Here's an interesting read: How Long Is a Will Good For?

Taiwan Semiconductor Manufacturing (TSM) has shown a relatively stable share price in the past 3 months compared to the US market, with its weekly movement averaging 4.2%, which is lower than the market average of 6.4%.

This stability is a positive sign for investors, as it suggests that TSM's price is less prone to sudden fluctuations. Over the past year, TSM's weekly volatility has remained stable at 4%.

TSM's price movement is also relatively stable compared to the semiconductor industry average, which is 7.6%. This suggests that TSM's price is influenced more by its own fundamentals rather than industry-wide trends.

Here's a comparison of TSM's volatility with the US market:

This table highlights the relatively low volatility of TSM's price compared to the US market.

In the realm of risk and dividend, it's essential to assess the potential risks associated with investing in a particular company. No risks detected for TSM from our risk checks.

Investors often rely on thorough risk analysis to make informed decisions about their investments. This process can help identify potential pitfalls and mitigate them.

Companies with a strong financial foundation tend to be less risky, and their dividend payments are often more stable. TSM's financial stability is a testament to this principle.

A well-structured risk analysis can provide valuable insights into a company's financial health and help investors make more informed decisions.

TSM has a strong presence in the gaming community, with a large and dedicated fan base. This community engagement is a major factor in the company's success.

TSM's esports teams have won numerous championships, including the League of Legends Championship Series, the Fortnite World Cup, and the NBA 2K League Finals. This level of success has helped to establish TSM as a leader in the esports industry.

TSM's community outreach programs also provide valuable services to its fans, including charity events and educational initiatives.

The TSM Community Fair is a unique aspect of the TSM community, where users can see what others think the stock is worth. It's a valuable resource for getting a sense of the community's collective opinion on the stock's value.

You can view the fair value set by 908 others in the community, which can provide a interesting perspective on the stock's potential. This can be a useful tool for making informed investment decisions.

To get alerts when the fair value changes, you can follow the community's fair value or set your own. This way, you'll be notified whenever the community's opinion on the stock's value shifts.

The Motley Fool offers premium investing services that can help you make more informed investment decisions. These services provide stock recommendations and portfolio guidance to help you achieve your financial goals.

Their premium services also offer more in-depth analysis and expert advice to help you navigate the world of investing.

TSMC shares are well positioned to benefit from the ongoing AI boom, as the chipmaker constantly reinvents itself with superior process technologies.

The chipmaker's dominant and preferred status with its top clients, including AI bellwether Nvidia, is reflected in its large slice of the chip manufacturing market and pricing power.

A major snag for TSMC is its refusal to relocate its primary manufacturing operations out of Taiwan, giving rise to fears of supply disruption amid escalating geopolitical tensions between China and Taiwan.

There's nearly 20% potential upside from TSMC stock's current prices, as the chipmaker sees quarter-to-quarter improvement in its business throughout 2024.

TSMC's ability to keep its mature nodes profitable is a testament to its innovative approach and adaptability in the industry.