Taiwan Semiconductor Manufacturing (NYSE:TSM) & STMicroelectronics (NYSE:STM) Head to Head Analysis

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

Risk & Volatility

Taiwan Semiconductor Manufacturing has a beta of 1.44, meaning that its share price is 44% more volatile than the S&P 500. Comparatively, STMicroelectronics has a beta of 2, meaning that its share price is 100% more volatile than the S&P 500.

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%

Institutional and Insider Ownership

16.5% of Taiwan Semiconductor Manufacturing shares are held by institutional investors. Comparatively, 5.1% of STMicroelectronics shares are held by institutional investors. 1.1% of Taiwan Semiconductor Manufacturing shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Dividends

Taiwan Semiconductor Manufacturing pays an annual dividend of $3.46 per share and has a dividend yield of 0.9%. STMicroelectronics pays an annual dividend of $0.30 per share and has a dividend yield of 0.7%. Taiwan Semiconductor Manufacturing pays out 22.3% of its earnings in the form of a dividend. STMicroelectronics pays out 53.6% 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. Taiwan Semiconductor Manufacturing is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares Taiwan Semiconductor Manufacturing and STMicroelectronics”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Taiwan Semiconductor Manufacturing	$122.42 billion	15.89	$54.12 billion	$15.54	24.14
STMicroelectronics	$13.67 billion	2.74	$166.00 million	$0.56	74.54

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.

Analyst Ratings

This is a summary of recent recommendations and price targets for Taiwan Semiconductor Manufacturing and STMicroelectronics, as provided 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, suggesting a potential upside of 42.31%. STMicroelectronics has a consensus target price of $75.06, suggesting a potential upside of 79.82%. Given STMicroelectronics’ higher possible upside, analysts clearly believe STMicroelectronics is more favorable than Taiwan Semiconductor Manufacturing.

Summary

Taiwan Semiconductor Manufacturing beats STMicroelectronics on 13 of the 17 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 STMicroelectronics

STMicroelectronics N.V., together with its subsidiaries, designs, develops, manufactures, and sells semiconductor products in Europe, the Middle East, Africa, the Americas, and the Asia Pacific. The company operates through Automotive and Discrete Group; Analog, MEMS and Sensors Group; and Microcontrollers and Digital ICs Group segments. The Automotive and Discrete Group segment offers automotive integrated circuits (ICs), and discrete and power transistor products. The Analog, MEMS and Sensors Group segment provides industrial application-specific integrated circuits (ASICs) and application-specific standard products (ASSPs); general purpose analog products; custom analog ICs; wireless charging solutions; galvanic isolated gate drivers; low and high voltage amplifiers, comparators, and current-sense amplifiers; MasterGaN, a solution that integrates a silicon driver and GaN power transistors in a single package; wireline and wireless connectivity ICs; touch screen controllers; micro-electro-mechanical systems (MEMS) products, including sensors or actuators; and optical sensing solutions. The Microcontrollers and Digital ICs Group segment offers general purpose and secure microcontrollers; and radio frequency (RF) products. It also offers application-specific standard products for analog, digital and mixed-signal applications. In addition, the company provides assembly and other services. It sells its products through distributors and retailers, as well as through sales representatives. The company serves automotive, industrial, personal electronics and communications equipment, and computers and peripherals markets. STMicroelectronics N.V. was incorporated in 1987 and is headquartered in Geneva, Switzerland.