InvestorsObserver gives Taiwan Semiconductor Mfg. Co. Ltd. (TSM) a strong valuation score of 88 from its analysis. The proprietary scoring system considers the underlying health of a company by analyzing its stock price, earnings, and growth rate. TSM currently holds a better value than 88% of stocks based on these metrics. Long term investors focused on buying-and-holding should find the valuation ranking system most relevant when making investment decisions.
TSM has a trailing twelve month Price to Earnings (PE) ratio of 27.7. The historical average of roughly 15 shows a poor value for TSM stock as investors are paying higher share prices relative to the company's earnings. TSM's high trailing PE ratio shows that the firm has been trading above its fair market value recently. Its trailing 12-month earnings per share (EPS) of 2.10 does not justify the stock's current price. However, trailing PE ratios do not factor in the company's projected growth rate, resulting in many newer firms having high PE ratios due to high growth potential enticing investors despite inadequate earnings.
TSM's 12-month-forward PE to Growth (PEG) ratio of 1.31 is considered a poor value as the market is overvaluing TSM in relation to the company's projected earnings growth due. TSM's PEG comes from its forward price to earnings ratio being divided by its growth rate. A PEG ratio of 1 represents a perfect correlation between earnings growth and share price. Due to their incorporation of more fundamentals of a company's overall health and focusing on the future rather than the past, PEG ratios are one of the most used valuation metrics by analysts today.
TSM's valuation metrics are weak at its current price due to a overvalued PEG ratio despite strong growth. TSM's PE and PEG are worse than the market average resulting in a below average valuation score.