Advantest (OTCMKTS:ATEYY) vs. Taiwan Semiconductor Manufacturing (NYSE:TSM) Financial Analysis

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

Dividends

Advantest pays an annual dividend of $0.16 per share and has a dividend yield of 0.3%. Taiwan Semiconductor Manufacturing pays an annual dividend of $2.19 per share and has a dividend yield of 1.2%. Advantest pays out 13.1% of its earnings in the form of a dividend. Taiwan Semiconductor Manufacturing pays out 31.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Advantest	19.95%	29.15%	18.39%
Taiwan Semiconductor Manufacturing	40.51%	30.47%	19.55%

Institutional & Insider Ownership

0.0% of Advantest 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 company will outperform the market over the long term.

Analyst Recommendations

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

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Advantest	0	0	0	1	4.00
Taiwan Semiconductor Manufacturing	0	1	4	0	2.80

Taiwan Semiconductor Manufacturing has a consensus price target of $220.00, suggesting a potential upside of 16.18%. Given Taiwan Semiconductor Manufacturing’s higher possible upside, analysts plainly believe Taiwan Semiconductor Manufacturing is more favorable than Advantest.

Risk and Volatility

Advantest has a beta of 1.37, meaning that its share price is 37% more volatile than the S&P 500. Comparatively, Taiwan Semiconductor Manufacturing has a beta of 1.06, meaning that its share price is 6% more volatile than the S&P 500.

Earnings & Valuation

This table compares Advantest and Taiwan Semiconductor Manufacturing”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Advantest	$3.37 billion	13.06	$429.80 million	$1.22	48.87
Taiwan Semiconductor Manufacturing	$2,894.31 billion	0.34	$36.49 billion	$7.04	26.90

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

Summary

Taiwan Semiconductor Manufacturing beats Advantest on 11 of the 17 factors compared between the two stocks.

About Advantest

Advantest Corporation manufactures and sells semiconductors, component test system products, and mechatronics related products in Japan, the Americas, Europe, and Asia. The company operates through three segments: Semiconductor and Component Test System; Mechatronics Related Business; and Services, Support and Others. The Semiconductor and Component Test System segment provides customers with test system products for the semiconductor industry and the electronic parts industry, as well as offers test systems for SoC semiconductor devices, and test systems for memory semiconductors devices. The Mechatronics Related Business segment provides test handlers; mechatronic-applied products for handling semiconductor devices; and device interfaces, which serve as interfaces with the devices that are measured, as well as nano-technology related products. The Services, Support and Others segment provides test solutions of system level testing customer solutions for the semiconductor and modules, and support services. This segment is also involved in the sale of consumables and used products, and equipment lease and other businesses. It also engages in the research and development activities and provides maintenance and support services. The company was incorporated in 1946 and is headquartered in Tokyo, Japan.

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.