Is There Still Room for Growth in TSMC After Latest Earnings Surge in 2025?

Trying to make sense of Taiwan Semiconductor Manufacturing’s stock movements lately? You’re not alone. Whether you’re already holding shares, thinking about buying in, or just watching from the sidelines, recent gains have been hard to ignore. TSMC’s share price has climbed an impressive 20.0% over the past month and 44.9% year to date, with a stellar 63.1% rise in the last 12 months. If you zoom out even further, the stock has delivered more than 250% in five years. These explosive numbers are attracting new waves of investor interest. They are not just about market momentum; major developments in global chip demand and renewed optimism about the semiconductor sector’s strategic role have been driving the story.

Of course, with returns like these, the big question lingers: Is TSMC still undervalued, or are these gains evidence that the price has already run ahead of fundamentals? Looking at our value score, which rates companies on six classic valuation checks, Taiwan Semiconductor Manufacturing clocks in at a 3 out of 6. That means it appears undervalued on half of the key metrics our analysts track, which can be an intriguing starting point for anyone weighing their next move.

We’re going to break down exactly how TSMC stacks up through different valuation lenses. Before settling on the usual numbers, stick around for a deeper dive on a smarter way to judge value in this fast-moving market.

Taiwan Semiconductor Manufacturing delivered 63.1% returns over the last year. See how this stacks up to the rest of the Semiconductor industry.

Approach 1: Taiwan Semiconductor Manufacturing Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future cash flows and discounting them back to their present value using an appropriate rate. In this case, the DCF for Taiwan Semiconductor Manufacturing uses a two-stage Free Cash Flow to Equity model, which factors in both analyst estimates and forward-looking extrapolations.

Currently, Taiwan Semiconductor Manufacturing generates NT$803,162 Million in free cash flow, which demonstrates strong operational performance. Forecasts anticipate significant compound growth, with free cash flow projected to reach more than NT$3,583,246 Million by 2035, according to Simply Wall St's projections. Analyst-driven estimates are available up to 2028; after that point, longer-term figures are extrapolated.

The DCF model values Taiwan Semiconductor Manufacturing’s shares at an intrinsic fair value of $251.93 each. However, the analysis shows that the current share price is trading at a 16.0% premium to this estimate, suggesting the market is pricing in even more optimism than the cash flow forecast supports.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Taiwan Semiconductor Manufacturing.

Our Discounted Cash Flow (DCF) analysis suggests Taiwan Semiconductor Manufacturing may be overvalued by 16.0%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Taiwan Semiconductor Manufacturing Price vs Earnings

The price-to-earnings (PE) ratio is a favored metric for valuing profitable businesses like Taiwan Semiconductor Manufacturing because it directly connects a company’s market valuation to its underlying earnings. Investors lean on the PE as a fast way to gauge whether a stock is priced fairly compared to the profits it generates.

It is important to keep in mind that what counts as a “normal” or “fair” PE ratio depends on several factors, including the company’s expected earnings growth and how much risk investors are willing to take. Higher growth expectations and lower perceived risks tend to push the fair PE ratio upwards, and the opposite is also true.

Currently, Taiwan Semiconductor Manufacturing trades at a PE ratio of 25.1x. This is notably lower than both the industry average of 37.0x and the peer average of 55.8x. While these benchmarks offer some context, they do not factor in the company’s unique strengths and challenges.

Simply Wall St’s “Fair Ratio” uses a more nuanced approach, analyzing the company’s earnings growth outlook, margins, market cap, and risk profile in addition to its industry landscape to estimate what the PE ratio should be. For TSMC, that Fair Ratio is calculated at 42.3x, providing a more tailored benchmark than simply comparing to industry or peers.

When putting the numbers side by side, TSMC’s actual PE ratio is meaningfully below its Fair Ratio, suggesting the shares may be undervalued relative to their growth potential and risk-adjusted profile.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Taiwan Semiconductor Manufacturing Narrative

Earlier, we mentioned there is an even better way to understand valuation, so let’s introduce you to Narratives. Narratives are a powerful, user-friendly tool available on Simply Wall St’s Community page that allow you to define the story behind Taiwan Semiconductor Manufacturing’s numbers by connecting your assumptions about future revenue, margins, and fair value to what the company is actually worth. Rather than relying solely on traditional metrics, a Narrative transforms your view of TSMC from a set of raw figures into a coherent investment thesis, linking company news and forecasts to actionable insights. Narratives help you decide when to buy or sell by automatically comparing your Fair Value to the current share price, and they refresh each time new information such as earnings or industry news emerges. For example, some investors believe the political status quo will result in steady growth for TSMC and value the stock at $118.4 per share, while others set much higher or lower fair values based on different assumptions. By seeing and even creating these Narratives, you can judge which thesis fits your own perspective and make more informed decisions fast.

Do you think there's more to the story for Taiwan Semiconductor Manufacturing? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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