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GuruFocus has detected 3 Warning Signs with Taiwan Semiconductor Manufacturing Co Ltd $TSM.
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Taiwan Semiconductor Manufacturing Co Ltd (NYSE:TSM)
Piotroski F-Score
8 (As of Today)

Good Sign:

Piotroski F-Score of 8 is 8, indicating very healthy situation.

The zones of discrimination were as such:

Good or high score = 7, 8, 9
Bad or low score = 0, 1, 2, 3

Taiwan Semiconductor Manufacturing Co Ltd has an F-score of 8. It is a good or high score, which usually indicates a very healthy situation.

TSM' s Piotroski F-Score Range Over the Past 10 Years
Min: 3   Max: 9
Current: 8

3
9

During the past 13 years, the highest Piotroski F-Score of Taiwan Semiconductor Manufacturing Co Ltd was 9. The lowest was 3. And the median was 6.


Definition

How is the Piotroski F-Score calculated?

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Mar17) TTM:Last Year (Mar16) TTM:
Net Income was 2244.77773994 + 3075.99315874 + 3052.04074936 + 2859.13914783 = $11,232 Mil.
Cash Flow from Operations was 3302.67464396 + 4018.58962621 + 5788.02821831 + 5253.34007641 = $18,363 Mil.
Revenue was 6867.17789474 + 8278.73684679 + 8194.44349307 + 7632.24443451 = $30,973 Mil.
Gross Profit was 3539.75962848 + 4197.92565536 + 4284.6048343 + 3963.94091756 = $15,986 Mil.
Average Total Assets from the begining of this year (Mar16)
to the end of this year (Mar17) was
(52981.3865482 + 55866.6117647 + 54637.4566222 + 58945.8508461 + 63123.8441108) / 5 = $57111.0299784 Mil.
Total Assets at the begining of this year (Mar16) was $52,981 Mil.
Long-Term Debt was $4,379 Mil.
Total Current Assets was $26,940 Mil.
Total Current Liabilities was $10,492 Mil.
Net Income was 2570.29581011 + 2305.79666049 + 2107.75227581 + 1987.93070328 = $8,972 Mil.

Revenue was 6648.92297933 + 6504.68813419 + 6207.09336546 + 6243.59329066 = $25,604 Mil.
Gross Profit was 3226.8855791 + 3132.45553192 + 3016.87757125 + 2802.84950625 = $12,179 Mil.
Average Total Assets from the begining of last year (Mar15)
to the end of last year (Mar16) was
(49522.3980699 + 52069.4754387 + 48247.4115 + 50545.0481084 + 52981.3865482) / 5 = $50673.143933 Mil.
Total Assets at the begining of last year (Mar15) was $49,522 Mil.
Long-Term Debt was $5,560 Mil.
Total Current Assets was $24,933 Mil.
Total Current Liabilities was $7,239 Mil.

Profitability

Question 1. Return on Assets (ROA)

Net income before extraordinary items for the year divided by total assets at the beginning of the year.

Score 1 if positive, 0 if negative.

Taiwan Semiconductor Manufacturing Co Ltd's current net income (TTM) was 11,232. ==> Positive ==> Score 1.

Question 2. Cash Flow Return on Assets (CFROA)

Net cash flow from operating activities (operating cash flow) divided by total assets at the beginning of the year.

Score 1 if positive, 0 if negative.

Taiwan Semiconductor Manufacturing Co Ltd's current cash flow from operations (TTM) was 18,363. ==> Positive ==> Score 1.

Question 3. Change in Return on Assets

Compare this year’s return on assets (1) to last year’s return on assets.

Score 1 if it’s higher, 0 if it’s lower.

ROA (This Year)=Net Income (TTM)/Total Assets at the Beginning of This Year (Mar16)
=11231.9507959/52981.3865482
=0.21199805

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Mar15)
=8971.7754497/49522.3980699
=0.18116601

Taiwan Semiconductor Manufacturing Co Ltd's return on assets of this year was 0.21199805. Taiwan Semiconductor Manufacturing Co Ltd's return on assets of last year was 0.18116601. ==> This year is higher. ==> Score 1.

Question 4. Quality of Earnings (Accrual)

Compare Cash flow return on assets (2) to return on assets (1)

Score 1 if CFROA > ROA, 0 if CFROA <= ROA.

Taiwan Semiconductor Manufacturing Co Ltd's current net income (TTM) was 11,232. Taiwan Semiconductor Manufacturing Co Ltd's current cash flow from operations (TTM) was 18,363. ==> 18,363 > 11,232 ==> CFROA > ROA ==> Score 1.

Funding

Question 5. Change in Gearing or Leverage

Compare this year’s gearing (long-term debt divided by average total assets) to last year’s gearing.

Score 0 if this year's gearing is higher, 1 otherwise.

Gearing (This Year: Mar17)=Long-Term Debt/Average Total Assets from Mar16 to Mar17
=4379.24378522/57111.0299784
=0.07667947

Gearing (Last Year: Mar16)=Long-Term Debt/Average Total Assets from Mar15 to Mar16
=5559.85006475/50673.143933
=0.10971986

Taiwan Semiconductor Manufacturing Co Ltd's gearing of this year was 0.07667947. Taiwan Semiconductor Manufacturing Co Ltd's gearing of last year was 0.10971986. ==> This year is lower or equal to last year. ==> Score 1.

Question 6. Change in Working Capital (Liquidity)

Compare this year’s current ratio (current assets divided by current liabilities) to last year’s current ratio.

Score 1 if this year'’s current ratio is higher, 0 if it’s lower

Current Ratio (This Year: Mar17)=Total Current Assets/Total Current Liabilities
=26939.5384796/10492.4686528
=2.56751193

Current Ratio (Last Year: Mar16)=Total Current Assets/Total Current Liabilities
=24932.676648/7238.78624867
=3.44431729

Taiwan Semiconductor Manufacturing Co Ltd's current ratio of this year was 2.56751193. Taiwan Semiconductor Manufacturing Co Ltd's current ratio of last year was 3.44431729. ==> Last year's current ratio is higher ==> Score 0.

Question 7. Change in Shares in Issue

Compare the number of shares in issue this year, to the number in issue last year.

Score 0 if there is larger number of shares in issue this year, 1 otherwise.

Taiwan Semiconductor Manufacturing Co Ltd's number of shares in issue this year was 5186.1. Taiwan Semiconductor Manufacturing Co Ltd's number of shares in issue last year was 5186.1. ==> There is smaller number of shares in issue this year, or the same. ==> Score 1.

Efficiency

Question 8. Change in Gross Margin

Compare this year’s gross margin (gross profit divided by sales) to last year’s.

Score 1 if this year’s gross margin is higher, 0 if it’s lower.

Gross Margin (This Year: TTM)=Gross Profit/Revenue
=15986.2310357/30972.6026691
=0.51614103

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=12179.0681885/25604.2977696
=0.475665

Taiwan Semiconductor Manufacturing Co Ltd's gross margin of this year was 0.51614103. Taiwan Semiconductor Manufacturing Co Ltd's gross margin of last year was 0.475665. ==> This year's gross margin is higher. ==> Score 1.

Question 9. Change in asset turnover

Compare this year’s asset turnover (total sales for the year divided by total assets at the beginning of the year) to last year’s asset turnover ratio.

Score 1 if this year’s asset turnover ratio is higher, 0 if it’s lower

Asset Turnover (This Year)=Revenue (TTM)/Total Assets at the Beginning of This Year (Mar16)
=30972.6026691/52981.3865482
=0.58459404

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Mar15)
=25604.2977696/49522.3980699
=0.51702459

Taiwan Semiconductor Manufacturing Co Ltd's asset turnover of this year was 0.58459404. Taiwan Semiconductor Manufacturing Co Ltd's asset turnover of last year was 0.51702459. ==> This year's asset turnover is higher. ==> Score 1.

Evaluation

Piotroski F-Score= Que. 1+ Que. 2+ Que. 3+Que. 4+Que. 5+Que. 6+Que. 7+Que. 8+Que. 9
=1+1+1+1+1+0+1+1+1
=8

Good or high score = 7, 8, 9
Bad or low score = 0, 1, 2, 3

Taiwan Semiconductor Manufacturing Co Ltd has an F-score of 8. It is a good or high score, which usually indicates a very healthy situation.


Explanation

The developer of the system is Joseph D. Piotroski is relatively unknown accounting professor who shuns publicity and rarely gives interviews.

He graduated from the University of Illinois with a B.S. in accounting in 1989, received an M.B.A. from Indiana University in 1994. Five years later, in 1999, after earning a Ph.D. in accounting from the University of Michigan, he became an associate professor of accounting at the University of Chicago.

In 2000, he wrote a research paper called "Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers" (pdf).

He wanted to see if he can develop a system (using a simple nine-point scoring system) that can increase the returns of a strategy of investing in low price to book (referred to in the paper as high book to market) value companies.

What he found was something that exceeded his most optimistic expectations.

Buying only those companies that scored highest (8 or 9) on his nine-point scale, or F-Score as he called it, over the 20 year period from 1976 to 1996 led to an average out-performance over the market of 13.4%.

Even more impressive were the results of a strategy of investing in the highest F-Score companies (8 or 9) and shorting companies with the lowest F-Score (0 or 1).

Over the same period from 1976 to 1996 (20 years) this strategy led to an average yearly return of 23%, substantially outperforming the average S&P 500 index return of 15.83% over the same period.


Related Terms

Net Income, Cash Flow from Operations, Revenue, Gross Profit, Total Assets, Long-Term Debt, Total Current Assets, Total Current Liabilities


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Taiwan Semiconductor Manufacturing Co Ltd Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Question 1 1111111111
Question 2 1111111111
Question 3 0001010111
Question 4 1111111111
Question 5 1011010111
Question 6 1000000110
Question 7 0110000101
Question 8 0011010101
Question 9 0101010001
F-score 5567373868

Taiwan Semiconductor Manufacturing Co Ltd Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
Question 1 1111111111
Question 2 1111111111
Question 3 1111100011
Question 4 1111111111
Question 5 1111111111
Question 6 1111100000
Question 7 1000001111
Question 8 1111000111
Question 9 0111000011
F-score 8888645688
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