<div id="readability-page-1"><div id="blog-content"><img height="354" src="https://imageproxy.pbkrs.com/https://cdn.pixabay.com/photo/2016/04/20/08/21/entrepreneur-1340649_960_720.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="500" original-src="https://imageproxy.pbkrs.com/https://cdn.pixabay.com/photo/2016/04/20/08/21/entrepreneur-1340649_960_720.jpg"/>Image Source: Pixabay Each week we run a DCF (Discounted Cash Flow) model on a company from our watchlist. This week’s pick: Taiwan Semiconductor Manufacturing Company Limited (TSM). <h3>Profile</h3>Taiwan Semiconductor Manufacturing Company Limited (TSMC) is the world’s leading dedicated semiconductor foundry, manufacturing advanced logic chips used across data centers, AI accelerators, smartphones, PCs, automobiles, and industrial electronics. The company’s process leadership, scale advantages, customer diversity, and technological roadmap create durable competitive advantages that are difficult to replicate. While the semiconductor industry is cyclical and capital-intensive, TSMC consistently generates strong cash flows across business cycles supported by long-term structural demand for computation and advanced node capacity. <h3>DCF Analysis</h3>InputsDiscount Rate: 10% Terminal Growth Rate: 3% WACC: 10%Forecasted Free Cash Flows (USD)2025: $4.6 → PV: $4.2 2026: $5.0 → PV: $4.1 2027: $5.4 → PV: $4.1 2028: $5.8 → PV: $4.0 2029: $6.2 → PV: $3.9Total Present Value of FCFs = $20.3BTerminal Value Calculation (USD)Using the perpetuity growth model with 2029 FCF = $6.2B:TV = (6.2 × 1.03) ÷ (0.10 − 0.03) = $91.2BPresent Value of Terminal Value:PV(TV) = 91.2 ÷ (1.10)^5 = $56.6BEnterprise Value (USD)Enterprise Value = $20.3B + $56.6B = $76.9BNet Debt (USD)Cash &amp; Equivalents: ~$85B Total Debt: ~$27BNet Debt ≈ –$58BEquity Value &amp; Per-Share Value (USD)Equity Value: $76.9B + $58B = $134.9B Shares Outstanding: ~25.9BIntrinsic Value per Share ≈ $5.21(ADR represents 5 shares → ≈ $26.05/ADR)<h3> Conclusion</h3>DCF Value: ~$26/ADR Current Price: ~$339/ADR Margin of Safety: –92%TSMC remains a strategically critical semiconductor franchise with world-class manufacturing capabilities, strong structural demand drivers, and durable competitive advantages in process technology and scale. Its ability to consistently generate cash through semiconductor cycles supports long-term investment appeal.However, under a standardized DCF framework using a 10% discount rate and 3% terminal growth, the current market price implies expectations significantly above conservative intrinsic value. The valuation reflects premium assumptions about AI-driven demand for advanced nodes, margin expansion, capital returns, and geopolitical scarcity value.For long-term investors, TSM represents a dominant player in a structurally growing industry. At today’s valuation, however, the stock offers limited margin of safety, suggesting future returns are likely to be driven more by continued execution and industry tailwinds than by multiple expansion.<hr/>More By This Author:Deep Value Healthcare Services Operator – Nutex Health Inc Wingstop: Our Calculation Of Intrinsic Value Altria Group, Inc.: A Deep Value Consumer Staples Cash Machine</div></div>

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Taiwan Semiconductor Manufacturing Company Limited (TSMC) is analyzed using a DCF model, revealing an intrinsic value of approximately $5.21 per share, with a current market price of around $339 per ADR, indicating a significant margin of safety of -92%. Despite TSMC's strong cash flow generation and competitive advantages, the high market price reflects optimistic expectations about AI demand and growth. Long-term investors may find TSMC appealing, but the stock's current valuation suggests limited upside potential, relying more on execution and industry trends than on price appreciation.

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Taiwan Semiconductor Manufacturing Company Limited: Our Calculation Of Intrinsic Value