ARM (NASDAQ:ARM) and Taiwan Semiconductor Manufacturing (NYSE:TSM) Head to Head Analysis

Taiwan Semiconductor Manufacturing (NYSE:TSM) and ARM (NASDAQ:ARM) are both large-cap technology companies, but which is the better business? We will compare the two businesses based on the strength of their profitability, dividends, institutional ownership, earnings, valuation, risk and analyst recommendations.

Profitability

This table compares Taiwan Semiconductor Manufacturing and ARM’s 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%
ARM	17.13%	11.86%	9.14%

Analyst Recommendations

This is a summary of recent recommendations for Taiwan Semiconductor Manufacturing and ARM, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Taiwan Semiconductor Manufacturing	0	2	11	3	3.06
ARM	1	7	19	0	2.67

Taiwan Semiconductor Manufacturing presently has a consensus target price of $533.89, indicating a potential upside of 51.59%. ARM has a consensus target price of $291.72, indicating a potential upside of 74.98%. Given ARM’s higher probable upside, analysts clearly believe ARM is more favorable than Taiwan Semiconductor Manufacturing.

Volatility and Risk

Taiwan Semiconductor Manufacturing has a beta of 1.44, meaning that its share price is 44% more volatile than the S&P 500. Comparatively, ARM has a beta of 3.93, meaning that its share price is 293% more volatile than the S&P 500.

Institutional & Insider Ownership

16.5% of Taiwan Semiconductor Manufacturing shares are owned by institutional investors. Comparatively, 7.5% of ARM shares are owned by institutional investors. 1.1% of Taiwan Semiconductor Manufacturing shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Valuation and Earnings

This table compares Taiwan Semiconductor Manufacturing and ARM”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Taiwan Semiconductor Manufacturing	$122.42 billion	14.92	$54.12 billion	$15.54	22.66
ARM	$5.46 billion	32.59	$904.00 million	$0.87	191.63

Taiwan Semiconductor Manufacturing has higher revenue and earnings than ARM. Taiwan Semiconductor Manufacturing is trading at a lower price-to-earnings ratio than ARM, indicating that it is currently the more affordable of the two stocks.

Summary

Taiwan Semiconductor Manufacturing beats ARM on 10 of the 15 factors compared between the two stocks.

About Taiwan Semiconductor Manufacturing

Taiwan Semiconductor Manufacturing Company Limited, together with its subsidiaries, manufactures, packages, tests, and sells integrated circuits and other semiconductor devices in Taiwan, China, Europe, the Middle East, Africa, Japan, the United States, and internationally. It provides a range of wafer fabrication processes, including processes to manufacture complementary metal- oxide-semiconductor (CMOS) logic, mixed-signal, radio frequency, embedded memory, bipolar CMOS mixed-signal, and others. The company also offers customer and engineering support services; manufactures masks; and invests in technology start-up companies; researches, designs, develops, manufactures, packages, tests, and sells color filters; and provides investment services. Its products are used in high performance computing, smartphones, Internet of things, automotive, and digital consumer electronics. The company was incorporated in 1987 and is headquartered in Hsinchu City, Taiwan.

About ARM

Arm Holdings Plc engages in the licensing, marketing, research, and development of microprocessors, systems IP, graphics processing units, physical IP and associated systems IP, software, and tools. It operates through the following geographical segments: United Kingdom, United States, and Other Countries. The company was founded on November 12, 1990 and is headquartered in Cambridge, the United Kingdom.