Taiwan Semiconductor Manufacturing Co. (TSM) — Quantitative Forecast & Factor Scores
TSM screens as high-quality and fairly valued — DCF model implies a +26% margin of safety at current levels.
TSM's quantitative grade is Buy, with limited downside risk (CVaR -9.6%), and quality metrics (net margin 45%, ROE 35%). Taiwan Semiconductor Manufacturing Co. (TSM) trades at $326.74 with a valuation grade of Buy: a trailing P/E of 31.5x at a 1% discount to sector median, net margins of 45.1%, a DCF-implied intrinsic range of $307–$514 suggesting a +26% margin of safety, beta 1.28 (moderate risk profile).
Key Takeaways
- Valuation: Buy grade — P/E 31.5x — DCF range $307–$514 implies +26% margin of safety
- Risk: CVaR -9.6% (95th percentile, 1-month) indicates moderate tail exposure; beta of 1.28 amplifies broad market moves in both directions
- Strengths: Quality 5.0/5, Size 5.0/5, 45% net margin, 35% ROE dominate the factor profile
- Watch: Monitor earnings delivery — premium multiples leave limited margin for misses
Quantitative Factor Profile
Key Metrics
| Metric | Value |
|---|---|
| Current Price | $326.74 |
| P/E Ratio (TTM) | 31.5x |
| Forward P/E | 18.2x |
| P/S Ratio | 0.4 |
| EV/EBITDA | 2.5 |
| Beta | 1.28 |
| Net Margin | 45.1% |
| ROE | 35.1% |
| Debt/Equity | 19.6% |
| Dividend Yield | 1.08% |
| CVaR (95%, 1M) | -9.6% |
| Market Cap | $1.69T |
Earnings History
| Quarter | EPS Est. | EPS Actual | Surprise |
|---|---|---|---|
| Q4 2025 | $2.98 | $3.14 | +5.5% ✓ |
| Q3 2025 | $2.63 | $2.92 | +11.2% ✓ |
| Q2 2025 | $2.31 | $2.47 | +6.8% ✓ |
| Q1 2025 | $2.05 | $2.12 | +3.2% ✓ |
TSM vs. Sector Peers
| Ticker | P/E (TTM) | Beta | CVaR-95 | Net Margin |
|---|---|---|---|---|
| TSM | 31.5x | 1.28 | -9.6% | 45.1% |
| NVDA | 34.1x | 2.38 | -11.2% | 55.6% |
| AMD | 77.4x | 2.02 | -21.8% | 12.5% |
| AVGO | 58.5x | 1.26 | -13.2% | 36.6% |
| ASML | 45.7x | 1.43 | -12.6% | 29.4% |
Pairwise Correlation Matrix
TSM screens as an exceptional-quality business, at a broadly fair valuation. The four-quarter earnings beat streak is constructive, with improving surprise magnitude (+5.5% most recently).
TSM trades at 31.5x trailing earnings, in line with the sector. The DCF model implies a +26% margin of safety — the risk/reward is currently skewed to the upside.
The model rates this a Buy, and the DCF case is real — the margin of safety is wide enough to absorb some delivery variance. That gives me more conviction here than the factor scores alone would suggest. What I watch on this name is earnings consistency — specifically whether delivery against consensus is stable or deteriorating. That is usually where the rating gets confirmed or challenged before the price reflects it. The setup that would make me more positive is a quarter that confirms the operating leverage story. The setup that would make me cautious is any signal that consensus estimates are getting ahead of fundamentals.
Is TSM a buy, hold, or sell?
TSM carries a valuation grade of Buy. The trailing P/E of 31.5 sits broadly in line with the Technology sector median of 32.0x. Our discounted cash flow model produces an intrinsic range of $307–$514 — implying a +26% margin of safety at the current price of $326.74. The width of the DCF range reflects genuine uncertainty in the terminal growth rate assumption: the correct framework is a probability-weighted distribution over scenarios, not a single point estimate.
TSM has beaten consensus estimates in 100% of recent quarters, signalling strong execution consistency. The most recent quarter delivered a 5.5% earnings surprise. Analyst estimate revisions are trending upward.
What are TSM's key risk factors?
With a beta of 1.28, TSM exhibits an above-market risk profile relative to the broad market. The 95th-percentile CVaR of -9.6% on a one-month horizon should inform position sizing directly: at a 10% portfolio weight, this tail event contributes approximately 1.0% of total portfolio loss in the worst 5% of months. Net margins of 45.1% are significantly above the Technology sector average of 22%, reflecting durable pricing power. Return on equity of 35.1% indicates highly efficient capital allocation. The balance sheet is conservatively leveraged at 20% debt-to-equity.
The options market shows a put/call ratio of 1.34, reflecting a notably bearish skew in derivative positioning. Implied volatility of 49.0% exceeds realized volatility of 42.3% by 7 points, suggesting options are pricing in elevated risk. Short interest is low at 0.4% of float, suggesting limited bearish conviction.
How does TSM fit in a diversified portfolio?
At typical HENRY portfolio weights — 10–20% of the equity allocation — TSM carries a beta of 1.28, meaning it amplifies broad market moves proportionally. The appropriate weight is not a function of conviction alone, but of the full covariance structure across all holdings. See the Ledoit-Wolf covariance framework for the methodology behind these calculations.
Among closely correlated names, TSM shows the strongest co-movement with NVDA (0.72), AVGO (0.71), ARM (0.65). Investors seeking diversification should note these correlation dynamics when constructing multi-asset portfolios. With the top peer correlation at 0.72, adding TSM to a portfolio that already holds these names provides limited marginal diversification benefit — particularly during stress events when correlations converge toward 1.0.
True portfolio risk is a function of the full covariance structure across all holdings — not individual stock metrics. The Portfolio Health Check quantifies this at the portfolio level: it surfaces hidden concentration, marginal CVaR contributions, and the degree to which your overall allocation deviates from an optimal risk-adjusted mandate. The TSM analysis here is a single node in that larger structure.
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Launch Live Analysis →This analysis is produced using a systematic quantitative framework applied to market data and does not constitute investment advice. Prose commentary is AI-assisted and generated from structured quantitative inputs. All data and metrics are as of 2026-03-28 and are point-in-time estimates subject to revision without notice. CVaR figures are based on historical simulation and do not guarantee future outcomes. DCF ranges and upgrade/downgrade triggers are forward-looking statements based on current assumptions and may not materialise. Past performance does not guarantee future results. This analysis does not account for individual circumstances, tax position, or investment objectives — consult a qualified financial advisor before making investment decisions. This content is intended for informational purposes only and does not constitute regulated investment advice under MiFID II or FCA guidelines. This content is not intended for US persons or residents of jurisdictions where its distribution would be contrary to local law or regulation. This service is not directed at residents of Finland, Sweden, Norway, Denmark, Iceland, or Poland. The author may hold long or short positions in securities mentioned in this analysis. Nothing on this page represents a solicitation to buy or sell any security. A.L. Capital Advisory is an independent private advisory practice and is not affiliated with Taiwan Semiconductor Manufacturing Co.