Microchip Technology Inc (MCHP) stock analysis

P/E above its 5-year median

Microchip Technology's P/E of 47.1 is above its own 5-year median of 27.3.

P/E above the industry

Microchip Technology's P/E of 47.1 is above the Electronic Components and Accessories median of 34.8.

EV/EBITDA above its 5-year median

Microchip Technology's EV/EBITDA of 21.2 is above its 5-year median of 17.3.

P/B above the industry

Microchip Technology's price-to-book of 5.08 is above the Electronic Components and Accessories median of 3.49.

Trading above fair value

The share price of $62.13 is above our fair value estimate of $44.85.

Margin of safety under 20%

The price is 38.5% above fair value, so there is no margin of safety.

Revenue growing under 10% a year

Revenue grew -17.6% a year over the last three fiscal years, short of the 10% we look for.

EPS growing under 10% a year

Diluted EPS grew -62.0% a year over the last three fiscal years.

Earnings acceleration

Needs positive net income now, a year ago and five years ago.

Growing faster than the industry

Revenue grew 33.0% over the last twelve months; the Electronic Components and Accessories median is 17.3%.

Guidance raised

Microchip Technology raised its First Quarter Fiscal Year 2027 Net income outlook on May 7, 2026.

Gross margin improving

Gross margin was 62.7% over the last twelve months, against 54.1% a year earlier.

Return on equity under 15%

Return on equity was 12.6% over the last twelve months and averaged 18.3% over five years; we look for 15% on both.

Return on capital under 10%

Return on invested capital was 8.6%, below the 10% that usually covers the cost of capital.

Return on equity above the industry

Microchip Technology's return on equity of 12.6% is above the Electronic Components and Accessories median of 4.8%.

Earnings shrank over 5 years

Net income shrank 8.0% a year on average over the last five fiscal years.

Net margin below its 5-year average

Net margin was 15.0% over the last twelve months, against a 5-year average of 15.0%.

Net margin above the industry

Microchip Technology's net margin of 15.0% is above the Electronic Components and Accessories median of 2.9%.

High debt

Debt is 83.1% of shareholders' equity, above the 40% we consider low.

Debt falling against equity

Debt to equity fell from 167% five years ago to 83.1%.

Debt covered by cash flow

Operating cash flow over the last twelve months equals 27.7% of total debt.

Interest well covered

Operating income covers interest expense 5.7 times.

Short-term assets cover short-term debts

Current assets are 2.24 times current liabilities.

Low bankruptcy risk

The Altman Z-score is 3.77; above 3 is the safe zone and below 1.8 the distress zone.

Pays a dividend

Microchip Technology paid dividends worth 2.9% of the share price over the last twelve months.

Yield below Treasuries

The 2.9% yield is below the 4.4% on a 1-year Treasury.

Yield below the top quarter

The top quarter of US dividend payers yield 3.8% or more; Microchip Technology yields 2.9%.

Dividend not cut

The dividend per share has not fallen by more than 10% in any of the last 10 fiscal years.

Not covered by earnings

Dividends take 118% of net income, leaving little room.

Covered by free cash flow

Dividends take 67.8% of free cash flow.