Hi Don,
I like to use TSM as a good gauge for the industry. For example, trailing PE is around 80 but forward PE gets us about 24. As we start the recovery process it's very understandable for the high trailing PE since the expectations are much higher going forward. If the growth estimates continue to work higher, as we go through 2003, then it would not be too much to expect eps estimates to rise some and the forward PE might actually be quite low by this time next year. TSM has been suggesting that moderate growth should be sustainable (at least for the next quarter) and other key industry players have also suggested the same.
So much depends on your view of the intermediate future, say 6 to 12 months out. If you think that moderate growth doesn't justify a 24 PE for TSM, then the stock is not a buy. If you think that 2005 will show weakness compared to 2004 or that growth will be very slow, then that's another reason not to like paying for a forward PE of 24.
TSM is up about 100% off it's low, which means that it's market cap has grown from approx 25B to 50B, a bit pricey on a price-to-sales ratio or price-to-book for a stock with a trailing PE of 80 but not too pricey if one's expectations for 2004 are more aggressive then current estimates.
So, is the TSM cup half full or half empty?
Now one can try to use the same factors on any issue, not just TSM but TSM has been one of the better barometers, since they post monthly sales numbers and have been pretty vocal on their short term guidance, at least more vocal then some companies. |
