Strong growth investing is not about buying every stock with rising earnings; it is about combining fundamental momentum with technical confirmation. The screen that flagged TAIWAN SEMICONDUCTOR-SP ADR (NYSE:TSM) looks for companies growing at an above-average pace, with solid profitability and a manageable balance sheet, while also displaying a technical structure that suggests the market is beginning to reward that growth. A stock can have excellent fundamentals and still be a poor buy if the chart is broken, while a strong chart without fundamental support tends to fail quickly. This screen attempts to identify names where both sides of the equation are working.
Fundamentals: growth with profitability intact
The fundamental case for TSM rests on an unusual combination: accelerating growth and consistently high profitability. The company earns a ChartMill fundamental rating of 7 out of 10, with a growth score of 9 and a profitability score of 9. That puts it squarely in the territory the strong-growth methodology targets.
Key fundamental metrics from the report include:
- EPS growth over the past year: 53.27%
- Revenue growth over the past year: 31.41%
- Expected annual EPS growth over the next few years: 20.53%
- Expected annual revenue growth over the next few years: 23.74%
- Profit margin: 50.70%
- Operating margin: 56.38%
- Return on invested capital: 28.06%
- Debt-to-equity ratio: 0.13
The profitability picture is particularly notable. TSM ranks near the top of its industry on return on assets, return on equity, and return on invested capital, and its margins have been improving in recent years. That matters for a growth strategy because it means the expansion is not being bought with deteriorating economics. The company is generating strong cash flows while maintaining low leverage, which gives it room to fund its massive capital spending program without straining the balance sheet.
The health rating of 5 out of 10 is moderate, but the underlying solvency metrics look comfortable. The debt-to-FCF ratio is 0.86, meaning TSM could cover its debt obligations with less than one year of free cash flow. The current ratio of 2.46 also suggests no near-term liquidity pressure.
Investors who want to review the full fundamental breakdown can use this fundamental analysis report.
Technical picture: consolidation near highs
The technical report gives TSM a rating of 7 out of 10, with a setup rating of 8. The long-term trend is positive, while the short-term trend is currently neutral. That is a common pattern before a breakout: price consolidates, volatility compresses, and the stock builds a base below resistance before making its next move.
Several technical observations stand out:
- TSM is trading near the upper end of its 52-week range, with the stock at roughly 420 against a 52-week high of 479.
- Relative strength is strong, with TSM outperforming about 90% of the market over the past year.
- The 12-month performance is 73.69%, with gains spread across the period rather than concentrated in a short spike.
- The stock has been trading in a 372.72 to 437.99 range over the last month and is currently near the high of that range.
- Average daily volume is about 14.4 million shares, providing ample liquidity.
The setup architecture is also clean. There is a support zone between 404.92 and 411.80, formed by trend lines and moving averages across multiple time frames. Above the current price, the only notable resistance is at 477.58. With little overhead supply, a breakout above the recent range could open the door to a test of that level.
The main caution is that the short-term trend has turned neutral, and the stock has pulled back about 3.2% over the past month. That is not unusual in a consolidation phase, but it does mean the setup requires confirmation. A move above the recent highs would strengthen the breakout case, while a loss of the support zone would invalidate it.
For a more detailed look at the chart structure and key levels, see this technical analysis report.
Why the combination matters for this strategy
The strong-growth screen is designed to avoid two common pitfalls: buying a fundamentally sound company while it is still in a downtrend, and buying a technically strong stock with no earnings support. TSM currently sits in the middle of both criteria. The fundamental side shows a business growing revenue and earnings at rates that put it in the top tier of its industry. The technical side shows a stock that has already made a large advance, is consolidating, and is positioned near resistance with minimal overhead supply.
That combination is important because it addresses timing. A company can grow for years, but the stock may spend long periods going nowhere if the market is not willing to re-rate it. By requiring a favorable technical setup, the screen aims to identify the moments when growth is starting to get reflected in the price.
The valuation is the main limitation. TSM's fundamental valuation score is just 2 out of 10, reflecting a rich price-to-earnings multiple relative to some industry peers. The report notes that the high profitability and expected earnings growth of 36% may justify some of that premium, but it remains a risk. If growth decelerates or the macro environment turns against high-multiple technology names, the stock could face multiple compression even if the business performs well.
Risks to consider
- Valuation is elevated, and the stock may be sensitive to rising interest rates or a broader de-rating of growth names.
- The short-term technical trend is neutral, meaning the breakout is not confirmed yet.
- The health rating is only moderate, though debt ratios remain low.
- Geopolitical and supply-chain risks around semiconductor manufacturing are a permanent overhang for the company.
- A failed breakout below the identified support zone would likely require an exit rather than a longer wait.
Other screens confirm the TSM setup
TSM also appears on other ChartMill screens that mirror the two sides of this thesis. The Fastest Growing Stocks screen picks TSM for strong recent growth in both earnings and sales, confirming the fundamental momentum angle. Meanwhile, the Breakout Setups screen includes TSM on the strength of its constructive consolidation and potential for a breakout, matching the technical-confirmation side. Together, they reinforce the idea that TSM is not only growing, but also building a price structure that could support further upside.
Where to find similar setups
TSM is one example of the type of name this methodology targets, but it is not the only one. The screen combines strong growth, decent profitability and health, and technical breakout patterns to narrow the market down to a focused list of candidates. Investors who want to run the same scan and see which stocks are currently matching the criteria can do so by checking the strong growth and technical setup screen.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial advice or a recommendation to buy or sell any security. Always conduct your own research and consider your risk tolerance before making investment decisions.
Read full article here »
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Taiwan Semiconductor (NYSE:TSM): Strong Growth Backed by a Convincing Technical Setup
Strong growth investing is not about buying every stock with rising earnings; it is about combining fundamental momentum with technical confirmation. The screen that flagged TAIWAN SEMICONDUCTOR-SP ADR (NYSE:TSM) looks for companies growing at an above-average pace, with solid profitability and a manageable balance sheet, while also displaying a technical structure that suggests the market is beginning to reward that growth. A stock can have excellent fundamentals and still be a poor buy if the chart is broken, while a strong chart without fundamental support tends to fail quickly. This screen attempts to identify names where both sides of the equation are working.
Fundamentals: growth with profitability intact
The fundamental case for TSM rests on an unusual combination: accelerating growth and consistently high profitability. The company earns a ChartMill fundamental rating of 7 out of 10, with a growth score of 9 and a profitability score of 9. That puts it squarely in the territory the strong-growth methodology targets.
Key fundamental metrics from the report include:
The profitability picture is particularly notable. TSM ranks near the top of its industry on return on assets, return on equity, and return on invested capital, and its margins have been improving in recent years. That matters for a growth strategy because it means the expansion is not being bought with deteriorating economics. The company is generating strong cash flows while maintaining low leverage, which gives it room to fund its massive capital spending program without straining the balance sheet.
The health rating of 5 out of 10 is moderate, but the underlying solvency metrics look comfortable. The debt-to-FCF ratio is 0.86, meaning TSM could cover its debt obligations with less than one year of free cash flow. The current ratio of 2.46 also suggests no near-term liquidity pressure.
Investors who want to review the full fundamental breakdown can use this fundamental analysis report.
Technical picture: consolidation near highs
The technical report gives TSM a rating of 7 out of 10, with a setup rating of 8. The long-term trend is positive, while the short-term trend is currently neutral. That is a common pattern before a breakout: price consolidates, volatility compresses, and the stock builds a base below resistance before making its next move.
Several technical observations stand out:
The setup architecture is also clean. There is a support zone between 404.92 and 411.80, formed by trend lines and moving averages across multiple time frames. Above the current price, the only notable resistance is at 477.58. With little overhead supply, a breakout above the recent range could open the door to a test of that level.
The main caution is that the short-term trend has turned neutral, and the stock has pulled back about 3.2% over the past month. That is not unusual in a consolidation phase, but it does mean the setup requires confirmation. A move above the recent highs would strengthen the breakout case, while a loss of the support zone would invalidate it.
For a more detailed look at the chart structure and key levels, see this technical analysis report.
Why the combination matters for this strategy
The strong-growth screen is designed to avoid two common pitfalls: buying a fundamentally sound company while it is still in a downtrend, and buying a technically strong stock with no earnings support. TSM currently sits in the middle of both criteria. The fundamental side shows a business growing revenue and earnings at rates that put it in the top tier of its industry. The technical side shows a stock that has already made a large advance, is consolidating, and is positioned near resistance with minimal overhead supply.
That combination is important because it addresses timing. A company can grow for years, but the stock may spend long periods going nowhere if the market is not willing to re-rate it. By requiring a favorable technical setup, the screen aims to identify the moments when growth is starting to get reflected in the price.
The valuation is the main limitation. TSM's fundamental valuation score is just 2 out of 10, reflecting a rich price-to-earnings multiple relative to some industry peers. The report notes that the high profitability and expected earnings growth of 36% may justify some of that premium, but it remains a risk. If growth decelerates or the macro environment turns against high-multiple technology names, the stock could face multiple compression even if the business performs well.
Risks to consider
Other screens confirm the TSM setup
TSM also appears on other ChartMill screens that mirror the two sides of this thesis. The Fastest Growing Stocks screen picks TSM for strong recent growth in both earnings and sales, confirming the fundamental momentum angle. Meanwhile, the Breakout Setups screen includes TSM on the strength of its constructive consolidation and potential for a breakout, matching the technical-confirmation side. Together, they reinforce the idea that TSM is not only growing, but also building a price structure that could support further upside.
Where to find similar setups
TSM is one example of the type of name this methodology targets, but it is not the only one. The screen combines strong growth, decent profitability and health, and technical breakout patterns to narrow the market down to a focused list of candidates. Investors who want to run the same scan and see which stocks are currently matching the criteria can do so by checking the strong growth and technical setup screen.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial advice or a recommendation to buy or sell any security. Always conduct your own research and consider your risk tolerance before making investment decisions.
Read full article here »