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Bull of the Day: Microchip Technology (MCHP)

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With some uncertain trading in the summer, investors were starting to worry if the incredible growth in the semiconductor industry could keep up, and if stocks in this segment would continue moving in the right direction. After all, the space had been on fire and there was plenty of hype regarding a variety of new areas for semiconductor companies to expand into in the near future, but questions remained about how just how far in the future this boom might be.

With this backdrop, the latest earnings report from Micron (MU - Free Report) was definitely in focus for investors. However, the company thoroughly crushed estimates and now expects earnings and revenues to be ahead of the previous estimate as well. Shares are up nicely now, and this optimism has trickled down in to a number of other players in the space.

But in the wake of this report, where should investors focus now in the semiconductor world? Let’s take a closer look at one of the more promising options available to investors in this corner of the market, and why it might be poised for continued strength as well.

What About Now?

Though not in the same Zacks Industry as Micron, Microchip Technology (MCHP - Free Report) is also a well-positioned semiconductor stock. This is especially true when you consider what an incredible premium investors are putting on growth in today’s environment, as MCHP has a Growth Grade of ‘A’ right now.

This strong grade is due to the industry-beating margins and projected sales growth, as well as a ROE above 34%. Add in projected EPS growth over 30% and a stunning 57% growth in current cash flow growth, and it is clear that this stock is a growth investor’s dream.

But it isn’t just cash flow growth that is impressive, as the company is also making great gains on the profit front too. Analysts are also taking note of these trends, and we have seen only analyst upgrades when it comes to earnings expectations over the past two months.

The analyst moves haven’t just been a penny or two either. We have seen a pretty sizable magnitude change in the consensus for a number of time periods. This includes a seven percent shift in the current quarter consensus in the past two months, a 7.7% move in the full year consensus in the same time frame, and a similar boost to the following year as well.



Add in a double digit average beat in the last four earnings reports, and it is clear that this is a very well-rounded stock in a solid position. No wonder it has earned itself a Zacks Rank #1 (Strong Buy), and why it could be a top choice for investors seeking a great semiconductor play.

Bottom Line

If you are looking for a top stock to follow in Micron’s footsteps, MCHP might be an impressive choice. And while both are striking, Microchip actually has a better growth grade than Micron right now, so it is definitely well-positioned for gains as we head into Q4, making it worth a closer look for investors seeking a top semiconductor play to close out the year.


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