Taiwan Semiconductor Manufacturing (NYSE:TSM – Get Free Report) and STMicroelectronics (NYSE:STM – Get Free Report) are both large-cap technology companies, but which is the superior business? We will contrast the two companies based on the strength of their risk, dividends, profitability, analyst recommendations, valuation, institutional ownership and earnings.
Valuation and Earnings
This table compares Taiwan Semiconductor Manufacturing and STMicroelectronics”s gross revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Taiwan Semiconductor Manufacturing | $4,944.82 billion | 0.44 | $54.12 billion | $15.54 | 26.79 |
| STMicroelectronics | $11.80 billion | 3.58 | $166.00 million | $0.56 | 83.99 |
Taiwan Semiconductor Manufacturing has higher revenue and earnings than STMicroelectronics. Taiwan Semiconductor Manufacturing is trading at a lower price-to-earnings ratio than STMicroelectronics, indicating that it is currently the more affordable of the two stocks.
Risk and Volatility
Taiwan Semiconductor Manufacturing has a beta of 1.44, suggesting that its stock price is 44% more volatile than the S&P 500. Comparatively, STMicroelectronics has a beta of 2, suggesting that its stock price is 100% more volatile than the S&P 500.
Dividends
Taiwan Semiconductor Manufacturing pays an annual dividend of $3.43 per share and has a dividend yield of 0.8%. STMicroelectronics pays an annual dividend of $0.31 per share and has a dividend yield of 0.7%. Taiwan Semiconductor Manufacturing pays out 22.1% of its earnings in the form of a dividend. STMicroelectronics pays out 55.4% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Taiwan Semiconductor Manufacturing is clearly the better dividend stock, given its higher yield and lower payout ratio.
Insider & Institutional Ownership
16.5% of Taiwan Semiconductor Manufacturing shares are owned by institutional investors. Comparatively, 5.0% of STMicroelectronics shares are owned by institutional investors. 1.1% of Taiwan Semiconductor Manufacturing shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.
Analyst Ratings
This is a breakdown of current recommendations and price targets for Taiwan Semiconductor Manufacturing and STMicroelectronics, as reported by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Taiwan Semiconductor Manufacturing | 0 | 2 | 11 | 3 | 3.06 |
| STMicroelectronics | 0 | 6 | 13 | 0 | 2.68 |
Taiwan Semiconductor Manufacturing presently has a consensus target price of $533.89, indicating a potential upside of 28.25%. STMicroelectronics has a consensus target price of $75.06, indicating a potential upside of 59.57%. Given STMicroelectronics’ higher possible upside, analysts plainly believe STMicroelectronics is more favorable than Taiwan Semiconductor Manufacturing.
Profitability
This table compares Taiwan Semiconductor Manufacturing and STMicroelectronics’ net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Taiwan Semiconductor Manufacturing | 51.51% | 42.84% | 29.37% |
| STMicroelectronics | 3.80% | 4.71% | 3.31% |
Summary
Taiwan Semiconductor Manufacturing beats STMicroelectronics on 12 of the 17 factors compared between the two stocks.
About Taiwan Semiconductor Manufacturing
Taiwan Semiconductor Manufacturing Company (TSMC) is a semiconductor foundry that manufactures chips designed by other companies. It provides wafer fabrication and related services, including advanced packaging, serving customers across industries such as computing, communications, automotive and consumer electronics. Founded in 1987 and headquartered in Hsinchu, Taiwan, TSMC helped establish the dedicated foundry model, in which a manufacturer focuses on producing semiconductors for customers rather than selling its own chip designs.
About STMicroelectronics
STMicroelectronics is a global semiconductor company that designs, develops and manufactures chips and related products for customers in a range of industries. Its portfolio includes microcontrollers, analog and mixed-signal integrated circuits, power semiconductors, sensors, and microelectromechanical systems (MEMS). The company’s products are used in automotive systems, industrial equipment, communications devices, computers and consumer electronics. Its offerings support applications such as vehicle control and safety, factory automation, power management, and motion and environmental sensing.
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