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.
