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Aimia’s marketing program will be able to monitor what an eBay customer buys in the U.K. (ROBERT GALBRAITH/REUTERS)
Aimia’s marketing program will be able to monitor what an eBay customer buys in the U.K. (ROBERT GALBRAITH/REUTERS)

Five tech stocks to buy for 2013 Add to ...

TheStreet Ratings’ stock model projects a stock’s total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.

TheStreet Ratings model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e. how much one is willing to risk in order to earn profits?; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock’s valuation as compared to its stock’s performance.

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These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. As always, stock ratings should not be treated as gospel – rather, use them as a starting point for your own research.

Here’s our analysis of five out of 50 stocks TheStreet Ratings has identified as being rated a “Buy” heading into the New Year. To view a list of all 50 stocks simply download our free report.

Taiwan Semiconductor Manufacturing
Taiwan Semiconductor Manufacturing is rated by TheStreet Ratings as a buy with a grade of A+. The company’s strengths can be seen in multiple areas, such as its revenue growth, increase in net income, solid stock price performance and growth in earnings per share. Although the company may harbour some minor weaknesses, we feel they are unlikely to have a significant impact on results.

  • TSM’s very impressive revenue growth greatly exceeded the industry average of 4.0 per cent. Since the same quarter one year prior, revenues leaped by 65.0 per cent. Growth in the company’s revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 99.9 per cent when compared to the same quarter one year prior, rising from $861.41-million to $1,722.05-million (U.S.).
  • Powered by its strong earnings growth of 94.11 per cent and other important driving factors, this stock has surged by 29.45 per cent over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock’s future course, although almost any stock can fall in a broad market decline, TSM should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The company reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, it reported lower earnings of $0.86 versus $1.08 in the prior year. This year, the market expects an improvement in earnings ($1.07 versus $0.86).

Taiwan Semiconductor Manufacturing Company Limited engages in the computer-aided designing, manufacturing, packaging, testing, and selling integrated circuits and other semiconductor devices; and manufacturing masks. It has a market cap of $87.25-billion and is part of the technology sector and electronics industry.

View the full Taiwan Semiconductor Ratings Report.

MasterCard Incorporated
MasterCard Incorporated is rated by TheStreet Ratings as a buy with a grade of A+. The company’s strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, growth in earnings per share, increase in net income and good cash flow from operations. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

  • The revenue growth came in higher than the industry average of 10.7 per cent. Since the same quarter one year prior, revenues slightly increased by 5.5 per cent. Growth in the company’s revenue appears to have helped boost the earnings per share.
  • The company has improved earnings per share by 9.6 per cent in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, MasterCard increased its bottom line by earning $14.83 versus $14.05 in the prior year. This year, the market expects an improvement in earnings ($21.95 versus $14.83).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the IT Services industry average. The net income increased by 7.7 per cent when compared to the same quarter one year prior, going from $717.00-million to $772.00-million.
  • The gross profit margin for MasterCard is rather high; currently it is at 58.50 per cent. It has increased from the same quarter the previous year. Along with this, the net profit margin of 40.25 per cent significantly outperformed against the industry average.
  • Net operating cash flow has remained constant at $1,014.00-million with no significant change when compared to the same quarter last year. In addition, MasterCard has modestly surpassed the industry average cash flow growth rate of –5.60 per cent.

MasterCard Incorporated, a payments and technology company, together with its subsidiaries, provides transaction processing and other payment-related services in the United States and internationally. MasterCard has a market cap of $57.43-billion and is part of the services sector and diversified services industry.

View the full MasterCard Ratings Report.

Visa
Visa is rated by TheStreet Ratings as a buy with a grade of A. The company’s strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, increase in net income, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

  • The revenue growth came in higher than the industry average of 10.7 per cent. Since the same quarter one year prior, revenues rose by 14.6 per cent. Growth in the company’s revenue appears to have helped boost the earnings per share.
  • Visa has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favourable sign. Along with the favourable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.19, which illustrates the ability to avoid short-term cash problems.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the IT Services industry. The net income increased by 88.9 per cent when compared to the same quarter one year prior, rising from $880.00-million to $1,662.00-million.
  • Net operating cash flow has significantly increased by 57.71 per cent to $1,369.00-million when compared to the same quarter last year. In addition, Visa has also vastly surpassed the industry average cash flow growth rate of –5.64 per cent.
  • The gross profit margin for Visa is rather high; currently it is at 59.10 per cent. Regardless of its high profit margin, Visa has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, Visa’s net profit margin of 60.90 per cent significantly outperformed against the industry.

Visa Inc., a payments technology company, engages in the operation of retail electronic payments network worldwide. It facilitates commerce through the transfer of value and information among financial institutions, merchants, consumers, businesses, and government entities. Visa has a market cap of $78.6-billion and is part of the services sector and diversified services industry.

View the full Visa Ratings Report.

eBay
eBay is rated by TheStreet Ratings as a buy with a grade of A. The company’s strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity and reasonable valuation levels.

  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Internet Software & Services industry and the overall market, EBAY INC’s return on equity exceeds that of both the industry average and the S&P 500.
  • Although EBAY’s debt-to-equity ratio of 0.23 is very low, it is currently higher than that of the industry average. To add to this, eBay has a quick ratio of 2.33, which demonstrates the ability of the company to cover short-term liquidity needs.
  • eBay’s revenue growth trails the industry average of 44.3 per cent. Since the same quarter one year prior, revenues rose by 14.8 per cent. This growth in revenue appears to have trickled down to the company’s bottom line, improving the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Internet Software & Services industry. The net income increased by 21.7 per cent when compared to the same quarter one year prior, going from $490.50-million to $597.00-million.

eBay Inc. provides online platforms, services, and tools to help individuals and merchants in online and mobile commerce and payments in the United States and internationally.

View the full eBay Ratings Report.

Apple
Apple is rated by TheStreet Ratings as a buy with a grade of A. The company’s strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, robust revenue growth and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

  • Apple has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favourable sign. Along with the favourable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.24, which illustrates the ability to avoid short-term cash problems.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 27.6 per cent. Since the same quarter one year prior, revenues rose by 27.2 per cent. Growth in the company’s revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Computers & Peripherals industry average. The net income increased by 24.1 per cent when compared to the same quarter one year prior, going from $6,623-million to $8,223-million.
  • Apple has improved earnings per share by 23 per cent in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, Apple increased its bottom line by earning $44.16 versus $27.67 in the prior year. This year, the market expects an improvement in earnings ($49.37 versus $44.16).

Apple Inc., together with subsidiaries, designs, manufactures, and markets personal computers, mobile communication devices, and portable digital music and video players, as well as sells various related software, services, peripherals, and networking solutions.

View the full Apple Ratings Report.

Download a list of all 50 of TheStreet Ratings Tech Picks for 2013

Editor’s Note: TheStreet ratings do not represent the views of TheStreet’s staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

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