MCHP Key Financial Metrics & Ratios

Summary

Business

Earnings Call

Valuation

Profitability

Financial Health

10Y annualized return is positive but below market average at 7.0% per year

MCHP has met or exceeded earnings expectations in some recent quarters (6/10)

High Current Ratio Indicates Good Liquidity

Strong Gross Profit Margin

Decent Operating Profit Margin

Manageable Debt Levels

Positive Interest Coverage Ratio

🏗️ Strong Manufacturing Restructuring

💡 Product Innovation Leadership

🚀 Potential for Above-Market Growth

High P/E Ratio Indicates Potential Overvaluation

High Price-to-Sales Ratio

Low Net Profit Margin

Return on Equity Below Industry Average

High Debt-to-Assets Ratio

Low Cash Ratio

📉 High Inventory Levels

🔍 Low Visibility on Future Orders

⚠️ Operating Expense Challenges

Microchip Technology Incorporated is actively restructuring its operations to improve efficiencies while introducing innovative products to maintain its competitive edge. However, it faces significant challenges with high inventory levels and low visibility into future demand, which may impact short-term growth prospects. The company has potential for recovery, but execution on its strategic initiatives will be critical.

Analysis Date: February 6, 2025
Last Updated: March 12, 2025

+97%

+7.0% per year

Past performance does not guarantee future results. The data presented is indicative and may not be updated in real-time.

Country US

Exchange NASDAQ

Industry Semiconductors

Sector Technology

Market Cap $31.30B

CEO Mr. Stephen Sanghi

Microchip Technology Incorporated is a company that creates small computer chips used in a wide range of devices. These chips help control everything from cars and home appliances to industrial machines and communication systems. They also provide tools that help engineers design and program these chips for specific needs. Founded in 1989 and based in Chandler, Arizona, Microchip plays a key role in making technology smarter and more connected.

Streams of revenue

Semiconductor Products Member: 97%

Technology Licensing Member: 3%

Geographic Distribution

Asia: 0%

Other: 0%

Europe: 0%

Americas: 0%

Estimations for reference only

Core Products

📈

Analog Products Signal processing

💾

Memory Products Data storage

🔌

Microcontrollers Embedded control

⏰

Timing Solutions Clock management

📡

Wireless Solutions Connectivity tech

Business Type

Business to Business

Competitive Advantages

📦

Diverse Product Portfolio Microchip offers a wide range of microcontrollers, processors, and specialized products, catering to various industries and applications, reducing reliance on any single product line.

🔌

Focus on Embedded Solutions Microchip's emphasis on smart, connected, and secure embedded control solutions positions it favorably in the growing IoT market, leveraging industry trends for sustained growth.

🧠

Strong Intellectual Property The company holds numerous patents and licenses its proprietary technologies, such as SuperFlash, ensuring a competitive edge in memory solutions.

🤝

Established Customer Relationships Long-term partnerships with key customers across various industries lead to consistent demand and customer loyalty, making it difficult for competitors to penetrate these markets.

🏭

Robust Supply Chain and Manufacturing Capabilities Microchip's integrated manufacturing services, including wafer foundry and assembly, enhance control over production quality and costs, ensuring reliability in supply.

Key Business Risks

⚔️

Market Competition Intense competition from other semiconductor companies may erode market share and pressure pricing strategies.

📜

Regulatory Changes Changes in government regulations regarding technology, trade, or environmental standards can create compliance risks and financial burdens.

🚧

Supply Chain Disruptions Interruptions in the supply chain can lead to delays in production and increased costs, impacting sales and profitability.

💻

Technological Obsolescence Rapid technological advancements can render existing products obsolete, requiring continuous innovation and investment.

🌍

Global Economic Instability Economic downturns or geopolitical tensions can affect demand for semiconductor products and disrupt international operations.

3 Chip Stocks That Face Tariff Risks, Says Analyst

Susquehanna's Christopher Rolland expects semiconductor stocks to get hit coming and going, as Trump's tariffs take their toll on imports and exports.

Can MCHP's Expanding Portfolio Help the Stock Recover in 2025?

Microchip leverages product innovation to navigate market challenges and support long-term growth despite broad-based weakness across multiple product...

MCHPP: Microchip Technology's 7.5% Mandatory Convertible Preferred Stock IPO

We analyze Microchip Technology's 7.50% Series A Mandatory Convertible Preferred Stock after its IPO, despite it not fitting our typical financial obj...

Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.

Graham Value Metrics

Benjamin Graham's value investing approach focuses on finding stocks with a significant margin of safety between their intrinsic value and market price.

Intrinsic Value

Estimated fair value based on Graham's formula

$22.12

Current Market Price: $36.25

IV/P Ratio: 0.61x (>1.0 indicates undervalued)

Margin of Safety

Gap between intrinsic value and market price

-64.0%

Graham recommended a minimum of 20-30% margin of safety

Higher values indicate a greater potential discount to fair value

Graham Criteria Checklist

Benjamin Graham's value investing checklist for MCHP

Positive earnings (5+ years)

Dividend history (5+ years)

P/E ratio ≤ 20 (63.03)

P/B ratio ≤ 1.5 (3.23)

Current ratio ≥ 2.0 (2.25x)

Long-term debt < Net current assets (4.05x)

Margin of safety (-64.0%)

MCHP does not meet all Graham criteria

Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.

Strong Gross Profit Margin

55.37%

Gross Profit Margin

The gross profit margin of 55.37% indicates that MCHP retains a good portion of its sales as gross profit, which is favorable for covering other expenses.

Decent Operating Profit Margin

13.37%

Operating Profit Margin

An operating profit margin of 13.37% shows that MCHP is able to maintain reasonable profitability from its core operations.

Low Net Profit Margin

6.49%

Net Profit Margin

The net profit margin of 6.49% suggests that MCHP has limited profitability after expenses, which may limit reinvestment capabilities.

Return on Equity Below Industry Average

4.87%

Return on Equity

The return on equity (ROE) of 4.87% is relatively low, indicating less efficiency in generating profit from shareholders' equity.

About Profitability Metrics

Profitability metrics measure a company's ability to generate earnings relative to its revenue, operating costs, and other relevant metrics. Higher values generally indicate better performance.

Return on Equity (ROE)

Measures how efficiently a company uses its equity to generate profits

4.87%

10% 15%

Higher values indicate better returns for shareholders

TTM (as of 2025-04-25)

Gross Profit Margin

Percentage of revenue retained after accounting for cost of goods sold

55.37%

20% 40%

Higher values indicate better efficiency in production

TTM (as of 2025-04-25)

Net Profit Margin

Percentage of revenue retained after accounting for all expenses

6.49%

8% 15%

Higher values indicate better overall profitability

TTM (as of 2025-04-25)

Manageable Debt Levels

1.12

Debt-to-Equity Ratio

The debt-to-equity ratio of 1.12 indicates that MCHP has a relatively moderate level of debt compared to its equity, which is manageable.

Positive Interest Coverage Ratio

2.66

Interest Coverage Ratio

An interest coverage ratio of 2.66 indicates that MCHP can comfortably meet its interest obligations, reflecting good financial health.

High Debt-to-Assets Ratio

43.18%

Debt-to-Assets Ratio

With a debt-to-assets ratio of 43.18%, a significant portion of MCHP's assets are financed through debt, which can be a risk.

Low Cash Ratio

0.44

Cash Ratio

A cash ratio of 0.44 indicates that MCHP may have limited liquidity to cover short-term liabilities, which could be a concern in financial downturns.

About Financial Health Metrics

Financial health metrics assess a company's ability to meet its financial obligations and its overall financial stability.

Debt to Equity Ratio

Total debt divided by total equity

1.12x

1.0x 2.0x

Lower values indicate less financial leverage and risk

Less than 1.0 is conservative, 1.0-2.0 is moderate, >2.0 indicates high risk

Q3 2025

Current Ratio

Current assets divided by current liabilities

2.25x

1.0x 2.0x

Higher values indicate better short-term liquidity

Less than 1.0 is concerning, 1.0-2.0 is adequate, greater than 2.0 is good

Q3 2025

Meeting Expectations

6 /10

Higher values indicate better execution and credibility

🏗️ Strong Manufacturing Restructuring

3 active fabs after closure of Tempe fab

Number of Fabs

130 to 150 days

Target Inventory Days

Microchip is actively resizing its manufacturing footprint by closing the less efficient Tempe fab and reallocating production to more capable facilities. This strategy aims to optimize production capacity, reduce costs, and improve operational efficiency.

💡 Product Innovation Leadership

20 new Wi-Fi products and advanced RISC-V processors

New Product Launches

Focus on top 1,000 customers

Customer Engagement

The company has introduced advanced products, such as the new generation of 64-bit RISC-V processors and expanded its Wi-Fi portfolio, which are receiving strong customer interest, thereby reinforcing its competitive positioning in key growth markets.

📉 High Inventory Levels

266 days

Current Inventory Days

$250 million planned for reduction by FY 2026

Inventory Reduction Target

Microchip is facing elevated inventory levels (266 days), which have been a significant concern leading to operational inefficiencies and financial strains.

🚀 Potential for Above-Market Growth

$920 million to $1 billion

Revenue Guidance for March Quarter

54% to 55%

Non-GAAP Gross Margin Expectation

The CEO expressed confidence in achieving above-market growth as inventory levels normalize and new designs are brought to production, indicating a positive outlook for revenue recovery.

🔍 Low Visibility on Future Orders

Lower than December quarter

Current Bookings Trend

The company's bookings remain low with uncertainty regarding how quickly the market will recover, which may hinder the immediate growth trajectory.

⚠️ Operating Expense Challenges

34.9%

Current Operating Expenses as % of Sales

Operating expenses are projected to increase, impacting profitability in the near term while the company navigates through high fixed costs and tries to correct operational inefficiencies.