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MCHP vs. MPWR: Which Stock Should Value Investors Buy Now?

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Investors looking for stocks in the Semiconductor - Analog and Mixed sector might want to consider either Microchip Technology (MCHP - Free Report) or Monolithic Power (MPWR - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Microchip Technology and Monolithic Power are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that MCHP is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

MCHP currently has a forward P/E ratio of 10.38, while MPWR has a forward P/E of 31.44. We also note that MCHP has a PEG ratio of 0.83. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. MPWR currently has a PEG ratio of 1.26.

Another notable valuation metric for MCHP is its P/B ratio of 5.30. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, MPWR has a P/B of 12.83.

These metrics, and several others, help MCHP earn a Value grade of B, while MPWR has been given a Value grade of D.

MCHP is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that MCHP is likely the superior value option right now.


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Microchip Technology Incorporated (MCHP) - free report >>

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