Taiwan Semiconductor Manufacturing Co (Taiwan Semiconductor Manufacturing Co) ROC %

: 28.67% (As of Mar. 2024)

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ROC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROIC %. Taiwan Semiconductor Manufacturing Co's annualized return on capital (ROC %) for the quarter that ended in Mar. 2024 was 28.67%.

As of today (2024-04-23), Taiwan Semiconductor Manufacturing Co's WACC % is 12.46%. Taiwan Semiconductor Manufacturing Co's ROC % is 26.17% (calculated using TTM income statement data). Taiwan Semiconductor Manufacturing Co generates higher returns on investment than it costs the company to raise the capital needed for that investment. It is earning excess returns. A firm that expects to continue generating positive excess returns on new investments in the future will see its value increase as growth increases.

Taiwan Semiconductor Manufacturing Co ROC % Historical Data

The historical data trend for Taiwan Semiconductor Manufacturing Co's ROC % can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

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Taiwan Semiconductor Manufacturing Co Annual Data

Trend

Dec14

Dec15

Dec16

Dec17

Dec18

Dec19

Dec20

Dec21

Dec22

Dec23

ROC %

23.49

30.00

28.76

35.36

24.73

Taiwan Semiconductor Manufacturing Co Quarterly Data
	Jun19	Sep19	Dec19	Mar20	Jun20	Sep20	Dec20	Mar21	Jun21	Sep21	Dec21	Mar22	Jun22	Sep22	Dec22	Mar23	Jun23	Sep23	Dec23	Mar24
ROC %																25.63	21.19	23.06	27.60	28.67

Taiwan Semiconductor Manufacturing Co ROC % Calculation

Taiwan Semiconductor Manufacturing Co's annualized Return on Capital (ROC %) for the fiscal year that ended in Dec. 2023 is calculated as:

	ROC % (A: Dec. 2023 )
=	NOPAT	/	Average Invested Capital
=	Operating Income * ( 1 - Tax Rate % )	/	( (Invested Capital (A: Dec. 2022 )	+	Invested Capital (A: Dec. 2023 ))	/ count )
=	29485.484 * ( 1 - 13.1% )	/	( (97634.83	+	109614.882)	/ 2 )
=	25622.885596	/	103624.856
=	24.73 %

where

	Invested Capital		(A: Dec. 2022 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Cash, Cash Equivalents, Marketable Securities	-	max(0, Total Current Liabilities	-	Total Current Assets	+	Cash, Cash Equivalents, Marketable Securities	))
=	161959.882	-	29537.136	-	( 51757.778	-	max(0, 32185.525	-	66973.441	+	51757.778	))
=	97634.83

	Invested Capital		(A: Dec. 2023 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Cash, Cash Equivalents, Marketable Securities	-	max(0, Total Current Liabilities	-	Total Current Assets	+	Cash, Cash Equivalents, Marketable Securities	))
=	177021.794	-	27369.544	-	( 54871.069	-	max(0, 30168.315	-	70205.683	+	54871.069	))
=	109614.882

Taiwan Semiconductor Manufacturing Co's annualized Return on Capital (ROC %) for the quarter that ended in Mar. 2024 is calculated as:

	ROC % (Q: Mar. 2024 )
=	NOPAT	/	Average Invested Capital
=	Operating Income * ( 1 - Tax Rate % )	/	( (Invested Capital (Q: Dec. 2023 )	+	Invested Capital (Q: Mar. 2024 ))	/ count )
=	31429.364 * ( 1 - 0% )	/	( (109614.882	+	0)	/ 1 )
=	31429.364	/	109614.882
=	28.67 %

where

	Invested Capital		(Q: Dec. 2023 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Cash, Cash Equivalents, Marketable Securities	-	max(0, Total Current Liabilities	-	Total Current Assets	+	Cash, Cash Equivalents, Marketable Securities	))
=	177021.794	-	27369.544	-	( 54871.069	-	max(0, 30168.315	-	70205.683	+	54871.069	))
=	109614.882

	Invested Capital		(Q: Mar. 2024 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Cash, Cash Equivalents, Marketable Securities	-	max(0, Total Current Liabilities	-	Total Current Assets	+	Cash, Cash Equivalents, Marketable Securities	))
=	0	-	0	-	( 0	-	max(0, 0	-	0	+	0	))
=	0

Note: The Operating Income data used here is four times the quarterly (Mar. 2024) data.

Taiwan Semiconductor Manufacturing Co (NYSE:TSM) ROC % Explanation

ROC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROIC %. The reason book values of debt and equity are used is because the book values are the capital the company received when issuing the debt or receiving the equity investments.

There are four key components to this definition. The first is the use of operating income or EBIT rather than net income in the numerator. The second is the tax adjustment to this operating income or EBIT, computed as a hypothetical tax based on an effective or marginal tax rate. The third is the use of book values for invested capital, rather than market values. The final is the timing difference; the capital invested is from the end of the prior year whereas the operating income or EBIT is the current year's number.

Why is ROC % important?

Because it costs money to raise capital. A firm that generates higher returns on investment than it costs the company to raise the capital needed for that investment is earning excess returns. A firm that expects to continue generating positive excess returns on new investments in the future will see its value increase as growth increases, whereas a firm that earns returns that do not match up to its cost of capital will destroy value as it grows.

As of today, Taiwan Semiconductor Manufacturing Co's WACC % is 12.46%. Taiwan Semiconductor Manufacturing Co's ROC % is 26.17% (calculated using TTM income statement data). Taiwan Semiconductor Manufacturing Co generates higher returns on investment than it costs the company to raise the capital needed for that investment. It is earning excess returns. A firm that expects to continue generating positive excess returns on new investments in the future will see its value increase as growth increases.

Be Aware

Like ROE % and ROA %, ROC % is calculated with only 12 months of data. Fluctuations in the company's earnings or business cycles can affect the ratio drastically. It is important to look at the ratio from a long term perspective.

Taiwan Semiconductor Manufacturing Co ROC % Related Terms

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Taiwan Semiconductor Manufacturing Co (Taiwan Semiconductor Manufacturing Co) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Technology » Semiconductors » Taiwan Semiconductor Manufacturing Co Ltd (NYSE:TSM) » Definitions » ROC %

Comparable Companies

Traded in Other Exchanges

2330:Taiwan TSM N:Mexico 0LCV:UK TSFA:Germany TSFA:Germany TSMC34:Brazil TSFA:Austria TSM:Argentina

Address

No. 8, Li-Hsin Road 6, Hsinchu Science Park, Hsinchu, TWN, 300-096

Website

https://www.tsmc.com

Taiwan Semiconductor Manufacturing Co. is the world's largest dedicated chip foundry, with almost 60% market share. TSMC was founded in 1987 as a joint venture of Philips, the government of Taiwan, and private investors. It went public as an ADR in the U.S. in 1997. TSMC's scale and high-quality technology allow the firm to generate solid operating margins, even in the highly competitive foundry business. Furthermore, the shift to the fabless business model has created tailwinds for TSMC. The foundry leader has an illustrious customer base, including Apple, AMD, and Nvidia, that looks to apply cutting-edge process technologies to its semiconductor designs. TSMC employs more than 73,000 people.