Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Taiwan Semiconductor Manufacturing Company Limited's cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 31.0% to 24.8% annually, with expenses (COGS, SG&A, R&D) held at historical ratios. Depreciation is computed from a vintage matrix based on a 5-year useful life. Working capital is modeled using historical turnover days (DSO 36, DPO 76, DIO 85). At a 9.3% WACC with mid-year discounting, the terminal value (96% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 28.0x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $817.44 per share, suggesting TSM is undervalued by 150.7% at the current price of $326.11.
Adjust parameters to explore scenarios. Changes are for exploration only and do not affect saved valuations.
| 2026 | 2027 | 2028 | 2029 | 2030 | Terminal | |
|---|---|---|---|---|---|---|
| Profit Before Tax | 71,222 | 88,307 | 106,095 | 111,706 | 139,388 | 142,873 |
| (−) Net Interest | 556 | 689 | 828 | 871 | 1,087 | 1,115 |
| (+) D&A | 31,844 | 39,845 | 49,541 | 63,382 | 78,265 | 80,222 |
| EBITDA | 103,621 | 128,841 | 156,463 | 175,959 | 218,741 | 224,209 |
| (−) Tax | 10,043 | 12,452 | 14,960 | 15,752 | 19,655 | — |
| (−) CapEx | 66,341 | 82,256 | 98,824 | 104,051 | 129,837 | — |
| (−) ΔWC | 2,085 | 4,101 | 4,270 | 1,347 | 6,645 | — |
| Free Cash Flow (FCF) | 25,151 | 30,032 | 38,408 | 54,810 | 62,604 | — |
| Peers' EBITDA Multiple | 28.0x | |||||
| Terminal Value | 6,271,133 | |||||
| WACC / Discount Rate | 9.28% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 24,060 | 26,290 | 30,768 | 40,179 | 41,996 | 4,024,281 |
| Enterprise Value | 4,187,574 | |||||
| Projection Period | 163,293 | 3.9% | ||||
| Terminal Value | 4,024,281 | 96.1% | ||||
| (−) Current Net Debt | (52,560) | |||||
| Equity Value | 4,240,134 | |||||
| (÷) Outstanding Shares | 5186M | |||||
| Fair Price | $818 | +150.7% | ||||
| WACC \ EV/EBITDA Exit Multiple | 24.0x | 26.0x | 28.0x | 30.0x | 32.0x |
|---|---|---|---|---|---|
| 7.3% | $772 | $833 | $894 | $955 | $1016 |
| 8.3% | $739 | $797 | $855 | $913 | $971 |
| 9.3% | $706 | $762 | $817 | $873 | $928 |
| 10.3% | $676 | $729 | $782 | $835 | $888 |
| 11.3% | $647 | $698 | $749 | $799 | $850 |
Current price: $326.11. Green = undervalued, Red = overvalued.
Based on default parameters
This is an unlevered Free Cash Flow to Firm (FCFF) model with a 5-year projection period. Revenue, expenses, D&A, and working capital are projected using the same line-by-line approach as the Growth Exit models. The key difference is the terminal value methodology: instead of assuming perpetual cash flow growth, the terminal value is calculated by applying the industry peer median EV/EBITDA multiple to the projected Year 6 EBITDA.
Using a peer exit multiple anchors the terminal value to how the market currently prices comparable companies, rather than relying on a theoretical perpetual growth assumption. This approach captures relative valuation dynamics and is particularly useful when a company is expected to converge toward industry-average profitability over time. The sensitivity matrix shows how fair value changes across different WACC and EV/EBITDA multiple scenarios.