Microchip Technology (MCHP) – Revenues Surge and Margins Widen

A strong performer from today's afternoon trading session is Microchip Technology, whose shares rose 1.7% to $89.76 per share. For those of you thinking about investing in the stock, here is a brief value analysis of the stock using the company's basic fundamental ratios.

Microchip Technology's Valuation Is in Line With Its Sector Averages:

Microchip Technology Incorporated develops, manufactures, and sells smart, connected, and secure embedded control solutions in the Americas, Europe, and Asia. The company belongs to the Technology sector, which has an average price to earnings (P/E) ratio of 27.16 and an average price to book (P/B) ratio of 6.23. In contrast, Microchip Technology has a trailing 12 month P/E ratio of 22.3 and a P/B ratio of 7.52.

Microchip Technology's PEG ratio is 1.62, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.

Growing Revenues With Increasing Reinvestment in the Business:

2020-03-31 2021-03-31 2022-03-31 2023-03-31
Revenue (MM) $5,274 $5,438 $6,821 $8,439
Gross Margins 61.5% 62.1% 65.2% 67.5%
Operating Margins 13.2% 18.4% 27.6% 36.9%
Net Margins 10.82% 6.42% 18.85% 26.52%
Net Income (MM) $571 $349 $1,286 $2,238
Net Interest Expense (MM) -$494 -$355 -$256 -$202
Depreciation & Amort. (MM) -$994 -$932 -$862 -$670
Earnings Per Share $1.11 $0.65 $2.27 $4.02
EPS Growth n/a -41.44% 249.23% 77.09%
Diluted Shares (MM) 512 541 566 544
Free Cash Flow (MM) $1,476 $1,824 $2,473 $3,135
Capital Expenditures (MM) -$68 -$93 -$370 -$486
Net Current Assets (MM) -$9,623 -$8,996 -$7,852 -$6,787
Current Ratio 1.35 0.89 1.75 0.98
Long Term Debt (MM) $8,873 $7,581 $7,687 $5,042
Net Debt / EBITDA 5.54 5.3 2.85 1.64

Microchip Technology has growing revenues and increasing reinvestment in the business and exceptional EPS growth. Additionally, the company's financial statements display a pattern of improving cash flows and wider gross margins than its peer group. However, the firm has a highly leveraged balance sheet. Finally, we note that Microchip Technology has average net margins with a positive growth rate.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.