Head to Head Comparison: ARM (NASDAQ:ARM) and Taiwan Semiconductor Manufacturing (NYSE:TSM)

ARM (NASDAQ:ARM) and Taiwan Semiconductor Manufacturing (NYSE:TSM) are both large-cap technology companies, but which is the superior business? We will contrast the two companies based on the strength of their analyst recommendations, profitability, dividends, risk, valuation, earnings and institutional ownership.

Valuation and Earnings

This table compares ARM and Taiwan Semiconductor Manufacturing”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
ARM	$4.92 billion	43.96	$904.00 million	$0.97	208.75
Taiwan Semiconductor Manufacturing	$122.42 billion	17.15	$54.12 billion	$15.54	26.06

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

Profitability

This table compares ARM and Taiwan Semiconductor Manufacturing’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
ARM	20.25%	12.24%	9.41%
Taiwan Semiconductor Manufacturing	51.51%	42.84%	29.37%

Institutional & Insider Ownership

7.5% of ARM shares are held by institutional investors. Comparatively, 16.5% of Taiwan Semiconductor Manufacturing shares are held by institutional investors. 1.1% of Taiwan Semiconductor Manufacturing shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Risk and Volatility

ARM has a beta of 3.93, meaning that its stock price is 293% more volatile than the S&P 500. Comparatively, Taiwan Semiconductor Manufacturing has a beta of 1.44, meaning that its stock price is 44% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current recommendations and price targets for ARM and Taiwan Semiconductor Manufacturing, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
ARM	1	7	18	1	2.70
Taiwan Semiconductor Manufacturing	0	1	12	3	3.12

ARM presently has a consensus target price of $303.32, suggesting a potential upside of 49.80%. Taiwan Semiconductor Manufacturing has a consensus target price of $528.78, suggesting a potential upside of 30.60%. Given ARM’s higher probable upside, analysts clearly believe ARM is more favorable than Taiwan Semiconductor Manufacturing.

Summary

Taiwan Semiconductor Manufacturing beats ARM on 10 of the 15 factors compared between the two stocks.

About ARM

Arm Holdings Plc engages in the licensing, marketing, research, and development of microprocessors, systems IP, graphics processing units, physical IP and associated systems IP, software, and tools. It operates through the following geographical segments: United Kingdom, United States, and Other Countries. The company was founded on November 12, 1990 and is headquartered in Cambridge, the United Kingdom.

About Taiwan Semiconductor Manufacturing

Taiwan Semiconductor Manufacturing Company Limited, together with its subsidiaries, manufactures, packages, tests, and sells integrated circuits and other semiconductor devices in Taiwan, China, Europe, the Middle East, Africa, Japan, the United States, and internationally. It provides a range of wafer fabrication processes, including processes to manufacture complementary metal- oxide-semiconductor (CMOS) logic, mixed-signal, radio frequency, embedded memory, bipolar CMOS mixed-signal, and others. The company also offers customer and engineering support services; manufactures masks; and invests in technology start-up companies; researches, designs, develops, manufactures, packages, tests, and sells color filters; and provides investment services. Its products are used in high performance computing, smartphones, Internet of things, automotive, and digital consumer electronics. The company was incorporated in 1987 and is headquartered in Hsinchu City, Taiwan.