Taiwan Semiconductor Manufacturing Company Limited (TSM) Stock Valuation — DCF Analysis
Semiconductors · NYSE
Current Price
$453.90
Intrinsic Value
$397.22
-14.3% margin of safety
COMPETITIVE MOAT
↑Unmatched Manufacturing Scale
TSMC's sheer production capacity and advanced process nodes are unparalleled. This scale creates significant barriers to entry for competitors seeking to match its output and technological leadership.
↑Deep Customer Relationships
Long-standing partnerships with major tech giants like Apple and Nvidia are crucial. These relationships are built on trust, reliability, and co-development, making switching suppliers extremely difficult and costly.
↑Technological Leadership
TSMC consistently leads in developing and implementing cutting-edge semiconductor manufacturing technologies. This innovation advantage allows them to produce the most advanced chips demanded by leading tech companies.
INVESTMENT RISKS
↓Geopolitical Concentration Risk
The company's heavy reliance on Taiwan for manufacturing operations presents significant geopolitical risks. Global supply chain diversification efforts by major tech players could impact future demand.
↓Intensifying Competition
While TSMC leads, competitors like Intel are investing heavily to catch up in advanced manufacturing. This could erode TSMC's technological lead and market share over time.
↓AI Demand Volatility
The current AI boom drives significant demand, but over-reliance on this sector creates risk. A slowdown or shift in AI investment strategies could impact TSMC's growth trajectory.
Base case
TSM base case valuation
A base case discounted cash flow model for TSM estimates an intrinsic value of about $397.22 per share, against a current price of $453.9. The model assumes 20.0% annual free cash flow growth, a 10.0% discount rate, and a 30x exit multiple.
Intrinsic Value
$397.22
Margin of safety
-14.3%
Expected annual return
-2.6%
Base case assumptions: 20.0% annual growth, 10.0% discount rate, 30x exit multiple, 5 year projection. Data as of 2026-06-29.
This base case uses default assumptions and is not financial advice. The intrinsic value changes significantly when the growth rate or discount rate changes. Open the calculator to set your own assumptions and see the full sensitivity range.
Customize the TSM valuation
Adjust the growth rate, discount rate, and exit multiple to see how the intrinsic value and margin of safety for Taiwan Semiconductor Manufacturing Company Limited respond.
Open DCF Calculator for TSMCompany Overview
Taiwan Semiconductor Manufacturing Company Limited (TSMC), along with its affiliated entities, operates globally in the semiconductor industry, specializing in the manufacturing, packaging, meticulous testing, and worldwide distribution of integrated circuits and other crucial semiconductor components. Its expansive international presence covers key markets such as Taiwan, China, Europe, the Middle East, Africa, Japan, and the United States. The company is renowned for its diverse array of wafer fabrication processes. These capabilities enable the production of various advanced semiconductor types, including complementary metal-oxide-semiconductor (CMOS) logic, mixed-signal devices, radio frequency components, embedded memory, and bipolar CMOS mixed-signal circuits. Beyond its core foundry services, TSMC extends its offerings to include dedicated customer and engineering support. It also undertakes the production of specialized masks, actively invests in burgeoning technology startups, and manages the entire lifecycle—from research and development through to manufacturing, packaging, testing, and sales—of color filters. Furthermore, the company provides a range of investment services. TSMC's cutting-edge products are indispensable across numerous sectors, powering high-performance computing, modern smartphones, Internet of Things (IoT) ecosystems, sophisticated automotive systems, and a broad spectrum of digital consumer electronics. Established in 1987, the enterprise is officially headquartered in Hsinchu City, Taiwan.
Financial Metrics — TSM Stock Valuation Data
Revenue/Share (TTM)
$158.26
FCF/Share (TTM)
$39.24
ROIC (TTM)
25.8%
ROE (TTM)
36.9%
P/FCF
60.4x
EV/EBITDA
20.1x
FCF Yield
1.66%
Debt/Equity
0.17x
Based on trailing twelve-month data, TSM shows a free cash flow per share of $39.24 and a ROIC of 25.8%, key inputs for stock valuation using the DCF method. The P/FCF ratio of 60.4x and FCF yield of 1.66% are important context metrics when evaluating TSM's stock valuation relative to peers.
Frequently Asked Questions
What is the intrinsic value of TSM?
Taiwan Semiconductor Manufacturing Company Limited currently generates $39.24 in free cash flow per share. At the current price of $453.90, a DCF model would discount these cash flows at an appropriate WACC and apply a terminal growth rate to arrive at an intrinsic value. The result depends heavily on your growth and discount rate assumptions — a 1% change in WACC typically shifts the fair value estimate by 10-15%. In MiniValuator the model uses a single discount rate that you can edit directly, 10% by default, rather than a computed WACC.
Is TSM undervalued?
TSM trades at a P/FCF ratio of 60.4x with a free cash flow yield of 1.66%. This elevated P/FCF suggests the market is pricing in significant future growth. However, whether TSM is truly undervalued requires comparing the DCF intrinsic value to the current market price and evaluating whether the margin of safety is sufficient for your risk tolerance.
How do I value TSM stock using DCF?
To perform a DCF valuation on Taiwan Semiconductor Manufacturing Company Limited: (1) Start with the trailing free cash flow per share ($39.24) as the base, (2) project future FCF growth over 5-10 years based on Semiconductors industry trends and company fundamentals, (3) apply a discount rate (WACC) reflecting TSM's risk profile — with a debt-to-equity of 0.17x, capital structure is an important factor, and (4) add a terminal value for cash flows beyond the projection period.
What is DCF valuation and how does it apply to TSM?
DCF (Discounted Cash Flow) estimates what a company is worth today based on its future cash generation. For Taiwan Semiconductor Manufacturing Company Limited, this means projecting how much free cash flow the company will produce over the next 5-10 years, shaped by Semiconductors trends, then discounting those amounts to today's dollars. TSM's ROIC of 25.8% indicates strong capital efficiency, which supports higher growth assumptions in the DCF model.
How does WACC affect TSM stock valuation?
WACC (Weighted Average Cost of Capital) is the discount rate in a DCF model — it reflects the minimum return investors require. For TSM, with a debt-to-equity ratio of 0.17x, the capital structure directly influences WACC. A 1% increase in WACC typically reduces the intrinsic value by 10-15%. At an EV/EBITDA of 20.1x, the market's implied discount rate can be reverse-engineered for comparison. In MiniValuator you set this discount rate yourself as a single editable number, 10% by default, instead of computing a formal WACC.
Learn More
- See TSM PE Valuation → — Earnings-based stock valuation using PE ratio analysis
- DCF Methodology — Step-by-step guide to discounted cash flow analysis
- PE Methodology — Guide to PE ratio stock valuation
- WACC — Understanding the discount rate used in DCF
- Margin of Safety — How to evaluate downside protection
- Intrinsic Value — How to evaluate stock fair value
- How to Calculate Intrinsic Value — Complete guide for investors
Related Valuations
All Technology valuationsDCF and P/E value TSM with different methods and assumptions, so the two conclusions can differ. Compare the P/E fair value.
Price as of 2026-06-29. Financial data from Financial Modeling Prep (trailing twelve months) · Valuation methodology by Charlie Wang.
This is an estimate, not investment advice.