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MCHP or MPWR: Which Is the Better Value Stock Right Now?

Zacks Equity Research
·2-min read

Investors interested in stocks from the Semiconductor - Analog and Mixed sector have probably already heard of Microchip Technology (MCHP) and Monolithic Power (MPWR). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Both Microchip Technology and Monolithic Power have a Zacks Rank of # 2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one piece of the puzzle for value investors.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.

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Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

MCHP currently has a forward P/E ratio of 12.52, while MPWR has a forward P/E of 42.65. We also note that MCHP has a PEG ratio of 0.86. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. MPWR currently has a PEG ratio of 1.71.

Another notable valuation metric for MCHP is its P/B ratio of 6.55. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, MPWR has a P/B of 17.61.

These are just a few of the metrics contributing to MCHP's Value grade of B and MPWR's Value grade of F.

Both MCHP and MPWR are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that MCHP is the superior value option right now.


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Microchip Technology Incorporated (MCHP) : Free Stock Analysis Report
 
Monolithic Power Systems, Inc. (MPWR) : Free Stock Analysis Report
 
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