Microsoft (NASDAQ:MSFT) and Taiwan Semiconductor Manufacturing (NYSE:TSM) are both large-cap computer and technology companies, but which is the superior business? We will compare the two companies based on the strength of their valuation, dividends, risk, institutional ownership, earnings, profitability and analyst recommendations.
Analyst Recommendations
This is a breakdown of current recommendations for Microsoft and Taiwan Semiconductor Manufacturing, as reported by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
|---|
| Microsoft | 0 | 2 | 30 | 1 | 2.97 |
| Taiwan Semiconductor Manufacturing | 2 | 0 | 6 | 0 | 2.50 |
Microsoft currently has a consensus price target of $268.82, suggesting a potential upside of 16.07%. Taiwan Semiconductor Manufacturing has a consensus price target of $99.00, suggesting a potential downside of 18.05%. Given Microsoft's stronger consensus rating and higher probable upside, analysts plainly believe Microsoft is more favorable than Taiwan Semiconductor Manufacturing.
Institutional & Insider Ownership
69.0% of Microsoft shares are owned by institutional investors. Comparatively, 18.3% of Taiwan Semiconductor Manufacturing shares are owned by institutional investors. 0.1% of Microsoft shares are owned by insiders. Comparatively, 1.1% of Taiwan Semiconductor Manufacturing shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company 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 and Taiwan Semiconductor Manufacturing has increased its dividend for 1 consecutive years.
Earnings and 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 | 12.21 | $44.28 billion | $5.76 | 40.21 |
| Taiwan Semiconductor Manufacturing | $34.63 billion | 18.09 | $11.83 billion | $3.39 | 35.63 |
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.
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 & Risk
Microsoft has a beta of 0.83, indicating that its share price is 17% less volatile than the S&P 500. Comparatively, Taiwan Semiconductor Manufacturing has a beta of 0.99, indicating that its share price is 1% less volatile than the S&P 500.
Summary
Microsoft beats Taiwan Semiconductor Manufacturing on 12 of the 18 factors compared between the two stocks.
