In the realm of investing, finding value in mega-cap stocks can often seem like searching for a needle in a haystack. Nvidia (NVDA), known for its dominant role in the semiconductor industry, particularly in GPUs for gaming and artificial intelligence, presents a compelling case with its forward price-earnings growth (PEG) ratio of 0.7x. The PEG ratio is a crucial metric that adjusts the traditional price-earnings (P/E) ratio by the company’s expected earnings growth rate. A PEG ratio below 1x typically signals that a stock may be undervalued compared to its expected growth, making it a potentially rewarding pick for value-oriented investors.

However, Nvidia is not alone in presenting value opportunities in the mega-cap space. 

In fact, a handful of mega-cap stocks show a lower or similar forward PEG ratio. Among these, two stocks stand out: Taiwan Semiconductor Manufacturing (TSM) and Novo Nordisk (NVO), with forward PEG ratios of 0.58x and 0.74x, respectively. These figures suggest that the market may be underestimating just how much these companies can grow relative to their current valuations. 

With that, let’s delve deeper into why TSM and NVO might offer even better value than Nvidia.

#1 Mega-Cap Stock Pick: Taiwan Semiconductor Manufacturing Company

With a market cap of $857 billion, Taiwan Semiconductor Manufacturing Company (TSM) is a leading semiconductor foundry. The company is known as the world’s largest dedicated foundry, specializing in manufacturing, packaging, testing, and selling integrated circuits and other semiconductor devices. TSM’s main products are utilized in high-performance computing, smartphones, the Internet of Things (IoT), automotive applications, and digital consumer electronics.

Shares of the chip-making giant have dropped 16.5% on a year-to-date basis. 

Recent News for TSM Stock

On March 23, a media report revealed that TSMC achieved a 60% yield in its 2-nanometer production, with plans to scale up to 50,000 wafers by the end of 2025. Apple (AAPL) is expected to be the first client for TSMC’s 2-nm wafer technology, aiming to manufacture A20 chips for its iPhone 18 family in the second half of 2026. According to the report, the company could soon enter full-scale production as it will begin taking orders for its 2-nm node starting April 1. With that, the company’s 2nm technology is likely to lead the foundry industry and retain its first-mover advantage in the years ahead.

On March 10, TSMC reported that its February revenue surged 43% year-over-year to 260 billion New Taiwan dollars, driven by increasing demand for AI applications. Also, the company’s revenue for January and February grew 39% year-over-year to about 553.3 billion New Taiwan dollars. TSM’s sales serve as a gauge for the semiconductor industry, as the company produces the majority of the world’s AI chips. Notably, the company is projecting approximately 35% year-over-year growth for Q1. Given the growth in the first two months and an improving semiconductor inventory cycle, there’s a high likelihood that the company will meet or even exceed its guidance.

On March 3, TSMC Chairman and CEO C.C. Wei and U.S. President Donald Trump announced that the company will invest $100 billion in new capital in the U.S. over the next four years to expand its presence there. As a result of this move, Citi analyst Laura Chen recently said in a note that TSMC could boost its capacity by as much as 20% (or possibly more) in the advanced node segment of the foundry market by 2030. “We estimate TSMC’s total advanced node capacity by 2030 could reach 500 [thousands of wafers per month],” she noted.

How Did TSMC Perform in Q4?

On Jan. 16, TSMC reported strong results for the fourth quarter of 2024, bolstering the view that it will secure significant AI-related gains in the coming years. The net revenue for the quarter stood at $26.88 billion, up 37% year-over-year and 14.4% sequentially. The top-line figure reached the upper end of the guidance and exceeded Wall Street’s consensus of $25.99 billion. Much of the growth was fueled by its cutting-edge process nodes, with its latest 3-nm and 5-nm technologies contributing 26% and 34% to wafer revenue, respectively. Advanced technologies, which include 7-nanometer nodes and newer, comprised 74% of total wafer revenue. This mix indicates that TSMC is on track to achieve an almost complete monopoly in the high-end chip manufacturing market.

Meanwhile, the company reported a gross margin of 59% and an operating margin of 49%, demonstrating continued profitability at the upper end or exceeding its previous guidance. These figures are almost unprecedented for a manufacturing business. As a result, TSMC posted GAAP EPS of $2.24, beating expectations by a penny. The company also has a strong balance sheet, with a substantial cash reserve of $74 billion.

Looking ahead, the company issued conservative revenue guidance for the first quarter, primarily attributing this to an unfavorable exchange rate. Management expects revenue to be between $25 billion and $25.8 billion, which represents a 34.7% year-over-year increase at the midpoint.

TSM Valuation, Dividend, and Analysts’ Estimates

According to Wall Street estimates, TSM is expected to post a 29.97% year-over-year increase in GAAP EPS to $9.15 in fiscal 2025, while revenue is projected to grow 26.72% year-over-year to $111.37 billion.

TSMC’s strong margins enable the company to pay an annualized dividend of $2.74 per share, which corresponds to a dividend yield of 1.7%, thus rewarding investors for holding the stock over the long term.

In terms of valuation, TSM stock looks very attractive at current levels. Priced at 17.97 times forward GAAP earnings, the stock trades at a discount compared to the sector median of 25.67x and its five-year average of 22.55x. Moreover, TSM’s forward PEG ratio of 0.58x is currently over 63% lower than the median of its tech sector peers.

What Do Analysts Expect for TSM Stock?

Wall Street analysts are highly bullish on TSM stock, awarding it a consensus “Strong Buy” rating. Among the 11 analysts offering recommendations for the stock, eight rate it as a “Strong Buy,” two give a “Moderate Buy” rating, and the remaining one advises holding. The mean target price for TSM stock is $244.50, which is about 48% above the March 28 closing price.

#2 Mega-Cap Stock Pick: Novo Nordisk

Based in Denmark, Novo Nordisk (NVO) is a global healthcare leader, primarily specializing in diabetes and obesity treatment, along with therapies for rare diseases. The company’s Diabetes and Obesity Care segment offers a broad array of products, including glucagon-like peptide-1 (GLP-1) receptor agonists, insulin pens, and intelligent diabetes management solutions. The Rare Disease segment focuses on developing treatments for rare blood and endocrine disorders, as well as hormone replacement therapies. NVO has also made progress in cardiovascular and emerging therapeutic areas. Its market cap currently stands at $310 billion.

Shares of the drugmaker have slumped 19.7% year-to-date, largely due to investor worries about heightened competition in the GLP-1 receptor agonist market and underwhelming Phase 3 results for CagriSema.

Recent News for NVO Stock

On March 29, Novo Nordisk unveiled the complete results from the SOUL cardiovascular outcomes trial, showing that Rybelsus significantly lowered the risk of major adverse cardiovascular events in adults with Type 2 diabetes and cardiovascular disease and/or chronic kidney disease. This new data from the Phase 3b trial was showcased in a late-breaking clinical trial session at the American College of Cardiology's Annual Scientific Session and Expo in Chicago.

On March 13, NVO rose over 1% after Kepler Cheuvreux upgraded the stock to “Buy” from “Hold.” The firm considers Novo Nordisk’s potential in the weight loss market compelling, especially after the recent selloff.

On March 10, NVO stock plunged more than 9% following the release of disappointing Phase 3 results for CagriSema, a weight-loss drug. In the trial, CagriSema achieved a 15.7% weight loss among overweight and obese adults with Type 2 diabetes over 68 weeks of treatment, compared to a 3.1% weight loss in those receiving a placebo. The trial met its primary endpoint, showing that CagriSema led to statistically significant and superior weight loss at week 68 compared to placebo. Still, the results fell short of analysts’ expectations, which had anticipated a minimum weight loss of 20%.

How Did Novo Nordisk Perform in Q4?

On Feb. 5, Novo Nordisk reported its financial results for the fourth quarter of 2024. The company’s net sales grew 30.1% year-over-year to 85.68 billion DKK. The top-line figure was bolstered by ongoing growth in demand for GLP-1-based products, including Ozempic, Rybelsus, and Victoza. Notably, Ozempic and Rybelsus, both containing the active ingredient semaglutide, recorded total sales of approximately 40.8 billion DKK, marking a 15.6% increase quarter-over-quarter and a 13.3% rise year-over-year. Also, Wegovy, a higher-dose version of semaglutide, generated sales of 19.9 billion DKK, up more than 100% year-over-year. Finally, the company’s franchise dedicated to rare endocrine diseases also boosted revenue growth, with sales of products for these disorders increasing 56.7% sequentially to 1.92 billion DKK. This increase was primarily fueled by Sogroya, a long-acting growth hormone. 

When it comes to profitability, Novo Nordisk’s operating profit grew 37% year-over-year to 36.73 billion DKK. Also, the operating margin improved to 42.9% from 40.6% in the same quarter of the previous year. As a result, diluted earnings per share rose 29% year-over-year to 6.34 DKK.

Looking ahead, management anticipates a 2025 sales increase of 16% to 24% year-over-year at constant exchange rates, with reported sales projected to be an additional 3 percentage points higher. As mentioned previously, Novo Nordisk is well-positioned for long-term growth thanks to its portfolio of GLP-1-based products. Moreover, the company boasts an impressive pipeline, with six pharmaceuticals already submitted and 14 currently in Phase 3 trials, further strengthening its growth outlook.

NVO Valuation, Dividend, and Analysts’ Estimates

Analysts tracking the company predict a 17.68% year-over-year growth in its GAAP EPS to $3.86 for fiscal 2025. Moreover, Wall Street expects NVO’s full-year revenue to advance 26.06% year-over-year to $51.05 billion.

Meanwhile, the company distributed 64.3 billion DKK to shareholders through dividends and share buybacks in 2024. At the Annual General Meeting on March 27, 2025, the Board of Directors proposed a final dividend of 7.90 DKK, bringing the total dividend for 2024 to 11.40 DKK, which includes the interim dividend paid in August 2024. This represented a 21% increase from 2023, marking the 29th consecutive year of rising dividends per share.

In terms of valuation, NVO stock looks appealing at current levels. The stock trades at 17.56 times forward GAAP earnings, which is below the sector median of 24.38x and its five-year average of 31.46x. Also, the company has a forward PEG ratio of 0.74x, well below the sector median of 1.66x. 

What Do Analysts Expect for NVO Stock?

Overall, Wall Street analysts have deemed NVO stock a “Moderate Buy,” with an average price target of $120.21, which indicates huge upside potential of 73.5% from the March 28 closing price. Out of the 17 analysts covering the stock, 11 recommend a “Strong Buy,” five suggest holding, and one gives a “Moderate Sell” rating.

On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.