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Microchip Technology (MCHP) Dips More Than Broader Markets: What You Should Know

Zacks Equity Research
·3 min read

Microchip Technology (MCHP) closed at $138.01 in the latest trading session, marking a -1.22% move from the prior day. This change lagged the S&P 500's 0.35% loss on the day. Meanwhile, the Dow lost 0.41%, and the Nasdaq, a tech-heavy index, lost 0.07%.

Prior to today's trading, shares of the chipmaker had gained 9.58% over the past month. This has outpaced the Computer and Technology sector's gain of 6.18% and the S&P 500's gain of 3.21% in that time.

MCHP will be looking to display strength as it nears its next earnings release. The company is expected to report EPS of $1.57, up 18.94% from the prior-year quarter. Our most recent consensus estimate is calling for quarterly revenue of $1.34 billion, up 4.38% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $6.25 per share and revenue of $5.35 billion. These totals would mark changes of +11.21% and +1.37%, respectively, from last year.

Investors should also note any recent changes to analyst estimates for MCHP. Recent revisions tend to reflect the latest near-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. The Zacks Consensus EPS estimate remained stagnant within the past month. MCHP is currently a Zacks Rank #3 (Hold).

In terms of valuation, MCHP is currently trading at a Forward P/E ratio of 22.35. For comparison, its industry has an average Forward P/E of 34.99, which means MCHP is trading at a discount to the group.

Investors should also note that MCHP has a PEG ratio of 1.43 right now. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. MCHP's industry had an average PEG ratio of 2.69 as of yesterday's close.

The Semiconductor - Analog and Mixed industry is part of the Computer and Technology sector. This industry currently has a Zacks Industry Rank of 65, which puts it in the top 26% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Make sure to utilize Zacks. Com to follow all of these stock-moving metrics, and more, in the coming trading sessions.


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