Emerging market (EM) stocks are having an exceptional year, with the MSCI Emerging Markets Investable Market Index up 15% year-to-date. As the Federal Reserve and other central banks begin cutting interest rates, these markets are set to keep climbing.
In this environment, companies like Taiwan Semiconductor Manufacturing Company Limited (TSM), Infosys Limited (INFY), and Deutsche Bank Aktiengesellschaft (DB) are well-positioned to take advantage of the changing global landscape.
Promisingly, EM equities outperformed developed markets (DM) last quarter, gaining 8.7% versus 6.4%, marking two straight quarters of EM outperformance since 2020. The rally began with the Fed’s rate cuts in mid-September and accelerated as China introduced stimulus measures. Further, these equities are poised to thrive, supported by stronger economic growth and rising corporate earnings.
According to S&P Global, EMs are projected to drive global economic growth over the next decade, with an average GDP growth rate of 4.06% through 2035, compared to just 1.59% for advanced economies. Moreover, these markets are likely to contribute 65% of global growth, with economies like China, India, Vietnam, and the Philippines leading the charge.
Furthermore, investors’ interest in emerging market stocks is evident from the iShares MSCI Emerging Markets ETF’s (EEM) 11.8% returns over the past six months. For those looking to tap into this momentum, companies like TSM, INFY, and DB offer strong fundamentals and the potential for continued growth in the evolving global market. Let’s discuss them in detail:
Taiwan Semiconductor Manufacturing Company Limited (TSM)
Headquartered in Hsinchu City, Taiwan, TSM manufactures, tests, and markets integrated circuits and other semiconductor products globally. Its products are used in automotive electronics, high-performance computing, and mobile device markets.
On October 4, the company signed a memorandum of understanding with Amkor Technology, Inc. (AMKR) to enhance Arizona’s advanced packaging and testing capabilities, bolstering the region’s semiconductor ecosystem. Under this agreement, TSM will contract AMKR for turnkey packaging and testing services at a planned facility in Peoria. These services will support TSM’s customers, particularly those utilizing Phoenix’s advanced wafer fabrication facilities.
In terms of trailing-12-month, TSM’s levered FCF margin of 22.86% is 117.9% higher than the 10.50% industry average. Similarly, its trailing-12-month net income margin and ROCE of 39.12% and 28.27% are considerably higher than the respective industry averages of 3.87% and 4.65%.
TSM’s net sales increased 38.9% year-over-year to NT$759.69 billion ($23.67 billion) in the third quarter that ended September 30, 2024. Its gross profit grew 48.1% from the prior year’s quarter to NT$439.34 billion ($13.69 billion), while its income from operations came in at NT$360.77 billion ($11.24 billion), up 58.2% year-over-year. In addition, the company’s net income and EPS increased 54.2% year-over-year to NT$325.26 billion ($10.14 billion) and NT$12.54, respectively.
The consensus revenue estimate of $26.22 billion for the fiscal fourth quarter (ending December 2024) represents a 32.3% increase year-over-year. The consensus EPS estimate of $2.17 for the same quarter indicates a 50.9% improvement year-over-year. The company has an excellent surprise history; it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
The stock has gained 120.5% over the past year and 93.1% year-to-date to close the last trading session at $200.86.
TSM’s promising fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
It has an A grade for Sentiment and Quality. In the 91-stock Semiconductor & Wireless Chip industry, it is ranked #8.
Beyond what we stated above, we also have TSM ratings for Growth, Value, Momentum, and Stability. Get all TSM ratings here.
Infosys Limited (INFY)
Headquartered in Bengaluru, India, INFY provides consulting, technology, outsourcing, and next-generation digital services in North America, Europe, India, and internationally.
On October 23, INFY announced an expanded strategic collaboration with Meta Platforms, Inc. (META) to accelerate generative AI innovation through open-source initiatives. As a strong advocate of open-source software, the company is committed to democratizing AI by leveraging Meta’s Llama stack, a suite of open-source large language models and tools.
By integrating Llama into its Topaz platform, INFY aims to drive AI-powered transformation, helping businesses scale, innovate, and compete more effectively.
The stock’s trailing-12-month EBITDA margin of 22.60% is 129.4% higher than the 9.85% industry average. INFY’s 17.16% trailing-12-month net income margin is 342.9% higher than the 3.87% industry average. Likewise, its trailing-12-month ROCE of 31.52% compares to the industry average of 4.65%.
For the fiscal second quarter ended September 30, 2024, INFY’s revenues amounted to $4.89 billion, up 3.7% year-over-year. Its gross profit rose 3.2% over the prior-year quarter to $1.49 billion. The company’s net profit and EPS came at $778 million and $0.19, representing an increase of 3.6% and 5.6% year-over-year, respectively. As of September 30, 2024, its cash and cash equivalents stood at $2.60 billion, compared to $1.77 billion as of March 31, 2024.
Street expects INFY’s revenue for the third quarter (ending December 2024) to increase 4.6% year-over-year to $4.89 billion, and its EPS is expected to grow 6.7% year-over-year to $0.19 for the same quarter. Moreover, the company has topped the consensus revenue estimates in three of the trailing four quarters, which is promising.
The stock has gained 32.4% over the past year to close the last trading session at $22.21.
INFY’s bright prospects are reflected in its POWR Ratings. The stock has an A grade for Stability and Quality. It is ranked #5 among nine stocks in the A-rated Outsourcing – Tech Services industry.
Click here to see additional ratings for INFY (Growth, Value, Momentum, and Sentiment).
Deutsche Bank Aktiengesellschaft (DB)
Based in Frankfurt am Main, Germany, DB provides corporate and investment banking and asset management products and services to private clients, corporate entities, and institutional clients worldwide. It operates through the Corporate Bank, Private Bank, and Asset Management segments.
On September 18, the bank announced a decrease in the prime lending rate from 8.5% to 8% at its New York Branch, Deutsche Bank New York (DBNY), and its affiliate, Deutsche Bank Trust Company Americas (DBTCA). This reduction could enhance DB’s competitiveness in the lending market, potentially boosting borrowing activity and supporting growth in its loan portfolio.
DB’s total net revenues for the fiscal third quarter that ended September 30, 2024, increased 1.3% year-over-year to €7.50 billion ($8.09 billion), while its net interest income amounted to €3.26 billion ($3.51 billion). The company’s profit attributable to DB shareholders rose 41.7% from the prior-year quarter to €1.46 billion ($1.38 billion). Also, its EPS came in at €0.81, representing an increase of 44.6% year-over-year.
For the quarter ending December 31, 2024, DB’s revenue is expected to increase 6.2% from the prior year to $7.68 billion. Its revenue for the fiscal years 2024 and 2025 is expected to register a year-over-year growth of 2.3% and 3.8%, respectively.
Over the past year, the stock has gained 70.6%, closing the last trading session at $17.32.
DB’s POWR Ratings reflect this positive outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Value and Stability. Out of 90 stocks in the Foreign Banks industry, it is ranked #8. To see the other ratings of DB for Growth, Momentum, Sentiment, and Quality, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
TSM shares were trading at $198.36 per share on Thursday morning, down $2.50 (-1.24%). Year-to-date, TSM has gained 92.38%, versus a 22.92% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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