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Microchip Technology Incorporated (MCHP) Hits Fresh High: Is There Still Room to Run?
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Have you been paying attention to shares of Microchip Technology (MCHP - Free Report) ? Shares have been on the move with the stock up 4.7% over the past month. The stock hit a new 52-week high of $91.55 in the previous session. Microchip Technology has gained 29.1% since the start of the year compared to the 38.5% move for the Zacks Computer and Technology sector and the 31.7% return for the Zacks Semiconductor - Analog and Mixed industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on May 4, 2023, Microchip Tech reported EPS of $1.64 versus consensus estimate of $1.62 while it beat the consensus revenue estimate by 0.53%.
For the current fiscal year, Microchip Tech is expected to post earnings of $6.25 per share on $8.81 billion in revenues. This represents a 3.82% change in EPS on a 4.45% change in revenues. For the next fiscal year, the company is expected to earn $6.45 per share on $8.98 billion in revenues. This represents a year-over-year change of 3.19% and 1.91%, respectively.
Valuation Metrics
Microchip Tech may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Microchip Tech has a Value Score of B. The stock's Growth and Momentum Scores are B and B, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 14.5X current fiscal year EPS estimates, which is not in-line with the peer industry average of 20.3X. On a trailing cash flow basis, the stock currently trades at 11.8X versus its peer group's average of 13.2X. Additionally, the stock has a PEG ratio of 0.86. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Microchip Tech currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Microchip Tech meets the list of requirements. Thus, it seems as though Microchip Tech shares could still be poised for more gains ahead.
How Does MCHP Stack Up to the Competition?
Shares of MCHP have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is NXP Semiconductors N.V. (NXPI - Free Report) . NXPI has a Zacks Rank of # 2 (Buy) and a Value Score of B, a Growth Score of B, and a Momentum Score of D.
Earnings were strong last quarter. NXP Semiconductors N.V. beat our consensus estimate by 5.63%, and for the current fiscal year, NXPI is expected to post earnings of $13.29 per share on revenue of $12.9 billion.
Shares of NXP Semiconductors N.V. have gained 8.3% over the past month, and currently trade at a forward P/E of 15.94X and a P/CF of 10.84X.
The Semiconductor - Analog and Mixed industry is in the top 20% of all the industries we have in our universe, so it looks like there are some nice tailwinds for MCHP and NXPI, even beyond their own solid fundamental situation.
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Microchip Technology Incorporated (MCHP) Hits Fresh High: Is There Still Room to Run?
Have you been paying attention to shares of Microchip Technology (MCHP - Free Report) ? Shares have been on the move with the stock up 4.7% over the past month. The stock hit a new 52-week high of $91.55 in the previous session. Microchip Technology has gained 29.1% since the start of the year compared to the 38.5% move for the Zacks Computer and Technology sector and the 31.7% return for the Zacks Semiconductor - Analog and Mixed industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on May 4, 2023, Microchip Tech reported EPS of $1.64 versus consensus estimate of $1.62 while it beat the consensus revenue estimate by 0.53%.
For the current fiscal year, Microchip Tech is expected to post earnings of $6.25 per share on $8.81 billion in revenues. This represents a 3.82% change in EPS on a 4.45% change in revenues. For the next fiscal year, the company is expected to earn $6.45 per share on $8.98 billion in revenues. This represents a year-over-year change of 3.19% and 1.91%, respectively.
Valuation Metrics
Microchip Tech may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Microchip Tech has a Value Score of B. The stock's Growth and Momentum Scores are B and B, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 14.5X current fiscal year EPS estimates, which is not in-line with the peer industry average of 20.3X. On a trailing cash flow basis, the stock currently trades at 11.8X versus its peer group's average of 13.2X. Additionally, the stock has a PEG ratio of 0.86. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Microchip Tech currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Microchip Tech meets the list of requirements. Thus, it seems as though Microchip Tech shares could still be poised for more gains ahead.
How Does MCHP Stack Up to the Competition?
Shares of MCHP have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is NXP Semiconductors N.V. (NXPI - Free Report) . NXPI has a Zacks Rank of # 2 (Buy) and a Value Score of B, a Growth Score of B, and a Momentum Score of D.
Earnings were strong last quarter. NXP Semiconductors N.V. beat our consensus estimate by 5.63%, and for the current fiscal year, NXPI is expected to post earnings of $13.29 per share on revenue of $12.9 billion.
Shares of NXP Semiconductors N.V. have gained 8.3% over the past month, and currently trade at a forward P/E of 15.94X and a P/CF of 10.84X.
The Semiconductor - Analog and Mixed industry is in the top 20% of all the industries we have in our universe, so it looks like there are some nice tailwinds for MCHP and NXPI, even beyond their own solid fundamental situation.