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Why Monolithic (MPWR) is a Superb Choice for Growth Investors

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On Dec 6, Monolithic Power Systems Inc. (MPWR - Free Report) was upgraded to Zacks Rank #1 (Strong Buy). The company is benefiting from strong demand for its products in the server, industrial and automotive markets.

These have been the primary factors behind the company’s solid Earnings Per Share (EPS) growth trajectory. Historical EPS growth of 33.24% is significantly better than the industry’s 17.24%.

Notably, Monolithic beat the Zacks Consensus Estimate for earnings in all of the trailing four quarters. The top line also surpassed the Zacks Consensus Estimate in three of the trailing four quarters.

Monolithic’s shares have returned 35.8% year to date compared with the 21.4% rally of its industry.



Automotive: Key Catalyst

Automotive presents significant growth opportunity for Monolithic. The segment accounted for 10% of total revenues in the last quarter. Moreover, segment revenues surged 48.8% from the year-ago quarter to $12.9 million. The upside was driven by higher product sales for applications in infotainment, safety and connectivity application products.

Management stated that automotive is Monolithic’s largest SAM (serviceable available market) opportunity at $6 billion. The company plans to offer a number of new products for applications in body controls, lighting, infotainment and advanced driver assistance systems (ADAS).

We also note that the company has a strong clientele in the automotive market which includes Delphi Automotive Plc, Mitsubishi, Magna and others.

Strong Projections

Apart from significant prospects in the automotive market, we expect Monolithic to benefit from the ongoing Grantley to Purley platform conversion in the server market. Higher dollar content in new servers based on Purley platform will drive the top line.

We believe that these factors will drive Monolithic’s EPS, which is currently expected to grow 26.52% and better than the industry’s projection of 14.15%.

A Solid Pick for Growth Focus Investors

Monolithic sports a Growth Style Score of A.

Our research shows that stocks with Growth Style Scores of A or B when combined with a Zacks Rank #1 or #2 (Buy) offer the best investment opportunities in the growth investing space.

Other Stocks

Investors can also consider Analog Devices (ADI - Free Report) , Maxlinear (MXL - Free Report) and Silicon Laboratories (SLAB - Free Report) from the same sector. These stocks sport the similar Zacks Rank as of Monolithic.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Long term earnings growth for Analog Devices, Maxlinear and Silicon are currently pegged at 10.40%, 20% and 15%, respectively.

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