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MCHP vs. MPWR: Which Stock Is the Better Value Option?

Investors interested in Semiconductor - Analog and Mixed stocks are likely familiar with Microchip Technology (MCHP) and Monolithic Power (MPWR). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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.

Microchip Technology has a Zacks Rank of #2 (Buy), while Monolithic Power has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that MCHP is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture 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 grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

MCHP currently has a forward P/E ratio of 13.48, while MPWR has a forward P/E of 36.69. We also note that MCHP has a PEG ratio of 0.80. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. MPWR currently has a PEG ratio of 1.47.

Another notable valuation metric for MCHP is its P/B ratio of 7.01. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, MPWR has a P/B of 13.69.

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

MCHP has seen stronger estimate revision activity and sports more attractive valuation metrics than MPWR, so it seems like value investors will conclude that MCHP is the superior 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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Zacks Investment Research