Currently, there are ten public companies in the world with a market capitalization of more than $1 trillion. Among the new entrants to the trillions club is Taiwan Semiconductor Manufacturing (NYSE: TSM).

By 2024, the company, also known as TSMC, gained 90%, essentially doubling the company’s market cap from roughly $500 million to more than $1 trillion today. That’s actually quite a rise in valuation in just 12 months, but what if I told you the stock is still a bargain?

Below, I’ll take a look at why TSMC is attractively priced right now and why it should be on the radar of growth investors.

In the table below, you can see TSMC’s year-over-year growth figures for both revenue and profit over the past few quarters:

Data source: Taiwan Semiconductor. Yoy = year after year.

Over the past 12 months, TSMC has rapidly accelerated its top-line growth. But more importantly, the company’s gross margin is expanding, also leading to strong bottom line growth. With a financial profile like this, it makes sense that TSMC stock has surged to new heights.

Additionally, industry trends suggest that the company’s long-term growth potential looks equally robust. Hyperscalers like now Microsoft, alphabet, Amazoni Oracle The whole plan Spend billions on AI infrastructure Over the next few years, that will require TSMC’s main foundry operations.

To my eye, the revenue and earnings projections illustrated above suggest that TSMC is well positioned to continue to capture a significant share of AI spending as new data center and chip programs come into place. of the facts

Still, even with an impressive revenue and earnings per share projection, TSMC stock is very expensive.

It’s understandable to think you’ve already missed the boat with TSMC. Stocks don’t rise at a 90% rate forever, and a trillion-dollar valuation might give the illusion that TSMC stock doesn’t have much more.

Shares are trading at $223 as of this writing, near an all-time high. Looking at the momentum TSMC’s fuel could suggest the stock is overvalued.

However, even with its rising stock price, TSMC’s price-to-caps ratio (P/E) is only 25. I say “only” because the average P/E of the average of S&P 500 is 24

As I outlined in the table and chart in the previous section, TSMC is a rare example of a business this size that is accelerating top-line and bottom-line growth. More importantly, the company’s EPS growth is climbing at a faster pace than sales. This is important to understand because when you analyze TSMC using earnings-based methodologies, the company’s valuation starts to look a lot more reasonable.

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