Taiwan Semiconductor Manufacturing (NYSE:TSM) Emerges as a Top Growth Stock Candidate

Growth investors looking for systematic ways to pick stocks often use proven methods that find firms with solid fundamental progress. One such system is from Louis Navellier's "The Little Book That Makes You Rich," which lists eight particular rules for finding leading growth stocks. These measures concentrate on earnings estimate changes, surprises, sales and profit expansion, margin improvement, cash flow health, profit progress, and return on equity. A recent filter using this approach has found Taiwan Semiconductor Manufacturing Co., Ltd. (NYSE:TSM) as a notable candidate for more detailed review.

Matching the Little Book Measures

Taiwan Semiconductor Manufacturing shows notable agreement with Navellier's growth investment rules in several areas:

Earnings Estimate Changes and Surprises

• Next-quarter EPS projections have been increased by 6.54% in the last three months
• The firm has reported three positive earnings surprises in the past four quarters
• Average earnings surprise is more than 114% during this time

The rising changes in analyst projections point to increasing belief in TSM's short-term outlook, while repeated earnings beats show the company's capacity to outperform forecasts, both important signs in the Little Book system that frequently come before good price movement.

Expansion Measures

• Quarterly sales expansion of 33.53% compared to the previous year
• Yearly sales expansion of 36.96%
• Quarterly EPS expansion of 613.70% compared to the previous year
• Yearly EPS expansion of 233.05%

These outstanding expansion levels show TSM's strong operational growth and performance. The system highlights that quickening sales and profit expansion are basic forces behind stock price increases, especially when confirmed by other quality measures.

Profitability and Effectiveness

• Operating margin improvement of 13.44% over the last year
• Free cash flow expansion of 318.14%
• Return on equity of 31.75%

The improving operating margins show TSM is increasing sales while managing expenses efficiently, leading to better profitability. The large free cash flow expansion offers financial room for ongoing investment and possible returns to shareholders. The high return on equity shows good use of shareholder money, a sign of quality growth firms.

Profit Progress

• Current quarterly EPS expansion of 613.70% is much higher than the prior similar period's expansion of 54.05%

This quickening in profit expansion represents the positive profit progress that Navellier notes as especially important, indicating the company's growth path is getting stronger rather than slowing.

Fundamental Review Summary

ChartMill's fundamental review report gives TSM a total score of 6 out of 10, with especially high marks in profitability (9/10) and expansion (8/10). The firm shows sector-leading margins and returns, with a net margin of 43.70% and operating margin of 49.48% doing better than most semiconductor industry competitors. While the stock price seems high compared to its own history, this is partly reasonable given TSM's outstanding expansion characteristics and profitability measures. The full fundamental review report offers more detailed views on these evaluations.

Investment Points

For investors using the Little Book system, TSM offers a notable example of a firm displaying several traits of leading growth stocks. The combined presence of strong earnings estimate changes, large earnings surprises, quickening sales and profit expansion, improving margins, healthy cash flow creation, and high returns on equity forms a strong fundamental picture. While the semiconductor sector deals with industry cycles, TSM's top market standing and technology edge provide built-in benefits that help continued performance.

The present market situation, with the S&P500 displaying positive long-term and short-term directions, may offer good settings for growth systems like the Little Book method. Still, investors should remember that growth stocks frequently show larger price swings, especially during market shifts.

Finding Other Possibilities

The Little Book filter that found TSM keeps producing potential investment candidates. Investors wanting to find other firms meeting these strict growth measures can view the current filter outcomes to see the whole list of qualifying stocks. Regular checking of filter results can help investors remain updated with new growth possibilities that fit their investment plan.

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Disclaimer: This article presents factual information and analysis for educational purposes only and does not constitute investment advice, recommendation, or endorsement of any security or strategy. Investors should conduct their own research and consult with financial advisors before making investment decisions. Past performance does not guarantee future results, and all investments carry risk including potential loss of principal.