Is It Too Late To Consider Buying Taiwan Semiconductor Manufacturing Company Limited (TPE:2330)?

Let's talk about the popular Taiwan Semiconductor Manufacturing Company Limited (TPE:2330). The company's shares saw a double-digit share price rise of over 10% in the past couple of months on the TSEC. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s take a look at Taiwan Semiconductor Manufacturing’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Taiwan Semiconductor Manufacturing

Is Taiwan Semiconductor Manufacturing still cheap?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 28.84x is currently trading slightly above its industry peers’ ratio of 27.22x, which means if you buy Taiwan Semiconductor Manufacturing today, you’d be paying a relatively sensible price for it. And if you believe Taiwan Semiconductor Manufacturing should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Furthermore, it seems like Taiwan Semiconductor Manufacturing’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Taiwan Semiconductor Manufacturing?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 51% over the next couple of years, the future seems bright for Taiwan Semiconductor Manufacturing. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has already priced in 2330’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at 2330? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on 2330, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 2330, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

It can be quite valuable to consider what analysts expect for Taiwan Semiconductor Manufacturing from their most recent forecasts. Luckily, you can check out what analysts are forecasting by clicking here.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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