Taiwan Semiconductor Mfg. (NYSE:TSM) and Daqo New Energy (NYSE:DQ) are both computer and technology companies, but which is the superior investment? We will contrast the two businesses based on the strength of their risk, institutional ownership, analyst recommendations, earnings, profitability, valuation and dividends.

Institutional and Insider Ownership

19.4% of Taiwan Semiconductor Mfg. shares are held by institutional investors. Comparatively, 38.8% of Daqo New Energy shares are held by institutional investors. 1.1% of Taiwan Semiconductor Mfg. shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares Taiwan Semiconductor Mfg. and Daqo New Energy’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Taiwan Semiconductor Mfg. 34.38% 22.62% 17.29%
Daqo New Energy 17.71% 17.53% 10.23%

Dividends

Taiwan Semiconductor Mfg. pays an annual dividend of $1.04 per share and has a dividend yield of 2.8%. Daqo New Energy does not pay a dividend. Taiwan Semiconductor Mfg. pays out 47.9% of its earnings in the form of a dividend. Taiwan Semiconductor Mfg. has raised its dividend for 3 consecutive years.

Risk & Volatility

Taiwan Semiconductor Mfg. has a beta of 1.18, meaning that its share price is 18% more volatile than the S&P 500. Comparatively, Daqo New Energy has a beta of 1.35, meaning that its share price is 35% more volatile than the S&P 500.

Valuation & Earnings

This table compares Taiwan Semiconductor Mfg. and Daqo New Energy’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Taiwan Semiconductor Mfg. $32.11 billion 5.90 $11.64 billion $2.17 16.83
Daqo New Energy $352.85 million 0.72 $92.84 million $8.50 2.86

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

Analyst Recommendations

This is a summary of current ratings and target prices for Taiwan Semiconductor Mfg. and Daqo New Energy, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Taiwan Semiconductor Mfg. 0 2 6 0 2.75
Daqo New Energy 0 1 2 0 2.67

Taiwan Semiconductor Mfg. currently has a consensus target price of $42.00, suggesting a potential upside of 15.01%. Daqo New Energy has a consensus target price of $53.00, suggesting a potential upside of 118.11%. Given Daqo New Energy’s higher probable upside, analysts plainly believe Daqo New Energy is more favorable than Taiwan Semiconductor Mfg..

Summary

Taiwan Semiconductor Mfg. beats Daqo New Energy on 12 of the 17 factors compared between the two stocks.

About Taiwan Semiconductor Mfg.

Taiwan Semiconductor Manufacturing Company Limited, together with its subsidiaries, engages in manufacturing, selling, packaging, testing, and computer-aided design of integrated circuits and other semiconductor devices. The company manufactures masks and electronic spare parts; researches, develops, designs, manufactures, sells, packages, and tests color filters; and offers customer and engineering support services. It is also involved in investing activities. The company operates in Taiwan, the United States, Asia, Europe, the Middle East, Africa, and internationally. Taiwan Semiconductor Manufacturing Company Limited was founded in 1987 and is headquartered in HsinChu, Taiwan.

About Daqo New Energy

Daqo New Energy Corp., together with its subsidiaries, manufactures and sells polysilicon and wafers in the People's Republic of China. It operates through two segments, Polysilicon and Wafers. The company offers polysilicon to photovoltaic product manufacturers who further process its polysilicon into ingots, wafers, cells, and modules for solar power solutions. It also provides multi-crystalline wafers. The company was formerly known as Mega Stand International Limited and changed its name to Daqo New Energy Corp. in August 2009. Daqo New Energy Corp. was founded in 2006 and is headquartered in Wanzhou, the People's Republic of China.

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