All The Recent Sell-Side Sentiment On Baidu, Inc. (BIDU) and Taiwan Semiconductor Manufacturing Company Limited (TSM)

Recent Sell-Side Sentiment On Baidu

observed rebound of 13.8% since bottoming out at $155.28 on Jul. 08, 2016. Meanwhile, due to an ongoing pressure which caused a decline of almost -5.94% in the past five days, the stock price is now up 7.48% so far on the year — still in strong territory. In this case, shares are down -10.66% from $201 , the 52-week high touched on Sep. 22, 2016, but are collecting gains at -0.32% for the past 12 months.

Is It Worth the Risk?

Brokerage houses, on average, are recommending investors to hold Baidu, Inc. (BIDU)’s shares projecting a $194.59 target price. What do this target means? Price targets reflect what the analyst believes a stock will be worth four quarters into the future. Are investors supposed to sell when the stock hits the target? Price targets frequently change, depending on the outlook for a company’s earnings. Sometimes it may seem like it, but analysts don’t just pull their price targets out of thin air. Typically, they estimate what the company’s earnings and cash flow will be for the next couple of years, and then apply a ratio – such as a price-to-earnings ratio – to those estimates to determine what the future stock price should theoretically be.

Revenue Growth Rates

BIDU’s revenue has grown at an average annualized rate of about 37.2% during the past five years. However, the company’s most recent quarter decrease of -2.6% looks unattractive.

Comparing Profitability

While there are a number of profitability ratios that measure a company’s ability to generate profit from the sales or services it provides, one of the most important is the net profit margin. It tells us what percentage of revenue a company keeps after all its bills are paid. While the higher this number is, the better, there is no gold standard. That’s why this number shouldn’t be looked at in isolation, but should be compared to a company’s peer group as well as its sector. Currently, Baidu, Inc. net profit margin for the 12 months is at 15.9%. Comparatively, the peers have a net margin 15.46%, and the sector’s average is 4.79%. In that light, it seems in good position compared to its peers and sector.

Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is another stock that is grabbing investors attention these days. Its shares have trimmed -0.44% since hitting a peak level of $34.29 on May. 03, 2017. Thanks to an increase of almost 3.9% in the past one month, the stock price is now outperforming with 18.75% so far on the year — still in strong zone. In this case, shares are 55.7% higher from $22.75, the worst price in 52 weeks suffered on May. 12, 2016, and are keeping their losses at 11.17% for the past six months.

Trading The Odds

The bad news is analysts don’t believe there’s a room for the share price to move in the upward direction. At recent closing price of $34.14, TSM has a chance to give up $-2.82 or -8.26% in 52 weeks, based on mean target price ($31.32) placed by analysts.The analyst consensus opinion of 2.4 looks like a hold. It has a 36-month beta of 0.88 , so you might not be in for a bumpy ride.

EPS Growth Rates

For the past 5 years, Taiwan Semiconductor Manufacturing Company Limited’s EPS growth has been nearly 19.5%. Sure, the percentage is encouraging but better times are ahead as looking out over a next 5-year period, analysts expect the company to see its earnings go up by 15%, annually.

Is it turning profits into returns?

Two other important profitability ratios for investors to know are both returns-based ratios that measure a company’s ability to create wealth for shareholders. They are return on equity and return on assets. Return on equity measures is a company’s ability to turn an investor’s equity into profit. The higher the return on equity, the better job a company is at optimizing the investment made on shareholders’ behalf. Taiwan Semiconductor Manufacturing Company Limited’s ROE is 25.6%, while industry’s is -26.49%. The average ROE for the sector stands at 10.91%.

Return on assets, on the other hand, measures a company’s ability to turn assets such as cash, buildings, equipment, or inventory into more assets. TSM’s ROA is 18.87%, while industry’s average is 1.69%. As with any return, the higher this number the better. However, it, too, needs to be taken into the context of a company’s peer group as well as its sector. The average return on assets for companies in the same sector is -67.22.