Microsoft (NASDAQ:MSFT) and Taiwan Semiconductor Manufacturing (NYSE:TSM) are both large-cap computer and technology companies, but which is the superior investment? We will compare the two businesses based on the strength of their dividends, profitability, analyst recommendations, institutional ownership, earnings, valuation and risk.
Profitability
This table compares Microsoft and Taiwan Semiconductor Manufacturing's net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
|---|
| Microsoft | 32.28% | 40.74% | 16.23% |
| Taiwan Semiconductor Manufacturing | 37.94% | 28.73% | 20.16% |
Volatility and Risk
Microsoft has a beta of 0.83, suggesting that its stock price is 17% less volatile than the S&P 500. Comparatively, Taiwan Semiconductor Manufacturing has a beta of 0.99, suggesting that its stock price is 1% less volatile than the S&P 500.
Earnings & Valuation
This table compares Microsoft and Taiwan Semiconductor Manufacturing's revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
|---|
| Microsoft | $143.02 billion | 12.22 | $44.28 billion | $5.76 | 40.14 |
| Taiwan Semiconductor Manufacturing | $34.63 billion | 18.29 | $11.83 billion | $3.39 | 36.03 |
Microsoft has higher revenue and earnings than Taiwan Semiconductor Manufacturing. Taiwan Semiconductor Manufacturing is trading at a lower price-to-earnings ratio than Microsoft, indicating that it is currently the more affordable of the two stocks.
Insider & Institutional Ownership
69.0% of Microsoft shares are held by institutional investors. Comparatively, 18.3% of Taiwan Semiconductor Manufacturing shares are held by institutional investors. 0.1% of Microsoft shares are held by insiders. Comparatively, 1.1% of Taiwan Semiconductor Manufacturing shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.
Dividends
Microsoft pays an annual dividend of $2.24 per share and has a dividend yield of 1.0%. Taiwan Semiconductor Manufacturing pays an annual dividend of $1.41 per share and has a dividend yield of 1.2%. Microsoft pays out 38.9% of its earnings in the form of a dividend. Taiwan Semiconductor Manufacturing pays out 41.6% 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. Microsoft has increased its dividend for 11 consecutive years.
Analyst Ratings
This is a breakdown of recent ratings and price targets for Microsoft and Taiwan Semiconductor Manufacturing, as provided by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
|---|
| Microsoft | 0 | 1 | 32 | 2 | 3.03 |
| Taiwan Semiconductor Manufacturing | 2 | 0 | 6 | 0 | 2.50 |
Microsoft presently has a consensus target price of $261.7397, indicating a potential upside of 12.90%. Taiwan Semiconductor Manufacturing has a consensus target price of $99.00, indicating a potential downside of 19.20%. Given Microsoft's stronger consensus rating and higher probable upside, equities analysts plainly believe Microsoft is more favorable than Taiwan Semiconductor Manufacturing.
Summary
Microsoft beats Taiwan Semiconductor Manufacturing on 12 of the 18 factors compared between the two stocks.
