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
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
ROE: 4.8685123289399
ROA: -0.34288199997441177
Gross Profit Margin: 55.36588954991696
Net Profit Margin: 6.4916226954529215
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
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
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 2025-04-16)
Return on Assets (ROA)
Measures how efficiently a company uses its assets to generate profits
-0.34%
3%
7%
Higher values indicate better asset utilization
TTM (as of 2025-04-16)
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 2025-04-16)
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 2025-04-16)
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
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
