TSMC's earnings have exceeded expectations in the past four quarters, and Zacks analyzes that the stock price may outperform the market in the short term.

TSMC has beaten market earnings estimates in each of the past four quarters. (Bloomberg)

[Financial Channel/Comprehensive Report] TSMC’s stock has risen 8.5% in the past month. Although media reports or rumors about major changes in the company’s business prospects usually cause trend fluctuations in its stock and lead to immediate price changes, some fundamental factors ultimately drive the buy-and-hold decision. Foreign media Zacks analysis reported that TSMC is expected to push up its stock price in the short term and may outperform the market.

Zacks believes that prioritizing changes in a company's earnings forecasts rather than focusing on any other factors is because the fair value of a stock is determined by the present value of its future earnings stream. If a company's earnings estimates are revised upward, the fair value of its stock will rise as well. A fair value that is higher than the current market price will stimulate investors' interest in buying the stock, thereby pushing up the stock price.

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TSMC expects earnings per share for the current quarter to be $4.45, an annual increase of 52.4%. The market consensus expects the company to earn $16.56 per share for this fiscal year, an annual increase of 55.5%.

For the next fiscal year, the market generally expects TSMC’s earnings per share to be US$21.22, an increase of 28.2% from the same period last year. Over the past month, the forecast has been revised up 1.7%.

Additionally, it's critical to understand the company's potential revenue growth. TSMC’s current quarter sales are generally expected to be US$45.54 billion, an annual increase of 37.6%. Sales for this fiscal year and the next fiscal year are expected to be US$167.14 billion and US$219.13 billion respectively, an increase of 36.5% and 31.1% respectively over the same period last year.

TSMC’s latest quarterly revenue was US$40.2 billion, an annual increase of 33.7%. Earnings per share during the same period were $4.31, compared with $2.47 in the same period last year. Compared to the Zacks Consensus Estimate of $39.63 billion, TSMC reported revenue that beat expectations by 1.44%. Earnings per share exceeded expectations by 11.37%.

TSMC has beaten market earnings estimates in each of the past four quarters. During this period, the company's revenue also exceeded market expectations.

Zacks evaluates traditional and non-traditional valuation metrics, ranking stocks on five grades from A to F (A is better than B; B is better than C; and so on), helping to identify whether a stock is overvalued, fairly valued, or tentatively undervalued. TSMC has a D rating in this regard, indicating that it trades at a premium to its peers. However, TSMC may outperform in the short term.

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