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Microchip Technology (MCHP) Outpaces Stock Market Gains: What You Should Know

·3 min read

Microchip Technology (MCHP) closed at $66.96 in the latest trading session, marking a +1.86% move from the prior day. This change outpaced the S&P 500's 1.53% gain on the day. Meanwhile, the Dow gained 1.19%, and the Nasdaq, a tech-heavy index, added 0.14%.

Heading into today, shares of the chipmaker had lost 7.89% over the past month, lagging the Computer and Technology sector's loss of 7.62% and the S&P 500's loss of 3.1% in that time.

Microchip Technology will be looking to display strength as it nears its next earnings release. In that report, analysts expect Microchip Technology to post earnings of $1.44 per share. This would mark year-over-year growth of 34.58%. Meanwhile, our latest consensus estimate is calling for revenue of $2.06 billion, up 25.01% from the prior-year quarter.

For the full year, our Zacks Consensus Estimates are projecting earnings of $5.66 per share and revenue of $8.14 billion, which would represent changes of +22.78% and +19.4%, respectively, from the prior year.

Any recent changes to analyst estimates for Microchip Technology should also be noted by investors. Recent revisions tend to reflect the latest near-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Our research shows that these estimate changes are directly correlated with near-term stock prices. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

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. Over the past month, the Zacks Consensus EPS estimate remained stagnant. Microchip Technology is holding a Zacks Rank of #3 (Hold) right now.

Digging into valuation, Microchip Technology currently has a Forward P/E ratio of 11.61. Its industry sports an average Forward P/E of 14.93, so we one might conclude that Microchip Technology is trading at a discount comparatively.

Also, we should mention that MCHP has a PEG ratio of 0.79. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. The Semiconductor - Analog and Mixed was holding an average PEG ratio of 0.79 at yesterday's closing price.

The Semiconductor - Analog and Mixed industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 80, putting it in the top 32% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.


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