MCHP vs. MPWR: Which Stock Should Value Investors Buy Now?
Investors interested in Semiconductor - Analog and Mixed stocks are likely familiar with Microchip Technology (MCHP) and Monolithic Power (MPWR). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, both Microchip Technology and Monolithic Power are holding a Zacks Rank of # 2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one factor that value investors are interested in.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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 11.50, while MPWR has a forward P/E of 36.88. We also note that MCHP has a PEG ratio of 0.79. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. MPWR currently has a PEG ratio of 1.48.
Another notable valuation metric for MCHP is its P/B ratio of 6.02. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, MPWR has a P/B of 15.23.
These are just a few of the metrics contributing to MCHP's Value grade of B and MPWR's Value grade of D.
Both MCHP and MPWR are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that MCHP is the superior value option right now.
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Microchip Technology Incorporated (MCHP) : Free Stock Analysis Report
Monolithic Power Systems, Inc. (MPWR) : Free Stock Analysis Report
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