Amount off the current price
is available for.
Share price is
vs Future cash flow value of
Current Discount Checks
to be considered undervalued it must be available for at least 20% below the
current price. Less than 40% is even better.
Microchip Technology's share price is below the future cash flow value, but not at a moderate discount (< 20%).
Microchip Technology's share price is below the future cash flow value, but not at a substantial discount (< 40%).
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for
it. This is similar to the price of fruit (e.g. Mangoes or Avocados) increasing
when they are out of season, or how much your home is worth.
The amount the stock market is willing to pay for
is considered below, and whether this is a fair price.
Price based on past earnings
Microchip Technology's earnings available for a low price, and how does
this compare to other companies in the same industry?
Microchip Technology is overvalued based on earnings compared to the US Semiconductor industry average.
Microchip Technology is overvalued based on earnings compared to the US market.
Price based on expected Growth
Microchip Technology's expected growth come at a high price?
Microchip Technology is poor value based on expected growth next year.
Price based on value of assets
What value do investors place on
Microchip Technology is overvalued based on assets compared to the US Semiconductor industry average.
Discounted cash flow (2 Stage Free Cash Flow to Equity)
The calculations below outline how an intrinsic value for
is arrived at by discounting future cash flows to their present value. We use
analyst's estimates of cash flows going forward 5 years.
The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is
limited to 0.8 to 2.0 (practical range for a stable firm). Note the market value of equity is used not the book value ($19,546,554,718).
The risk free rate of
2.47% is from the 10 year government bond rate in
The bottom-up beta is estimated by analysing other companies in the same
The Equity Risk Premium is calculated by subtracting the risk free rate from
the market return premium (7.53%) (source: Buffet).
The dividend discount model is automatically used for companies in the
following industries: Banks, Insurance, Real Estate Investment Trusts (REITs),
Diversified Financial Services and Capital Markets.
The future performance of a company is measured in the same way as past
performance, by looking at estimated
and how much profit it is expected to make.
Future estimates come from
professional analysts. Just like forecasting the weather, they don’t always get
Expected annual growth in earnings.
Earnings growth vs Low Risk Savings
expected to grow at an
Microchip Technology's earnings growth is expected to exceed the low risk savings rate of 4.5%.
Growth vs Market Checks
Microchip Technology's earnings growth is expected to exceed the US market average.
Microchip Technology's revenue growth is positive but not above the US market average.
Annual Growth Rates Comparison
Analysts growth expectations
High Growth Checks
Microchip Technology's earnings are expected to grow significantly at over 20% yearly.
Microchip Technology's revenue is expected to grow by 5% yearly, however this is not considered high growth (20% yearly).
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can
be gauged below. We look back 3 years and see if they were any good at
predicting what actually occurred. We also show the highest and lowest estimates
looking forward to see if there is a wide range.
Performance in 3 years
In the same way as past performance we look at the future estimated return
(profit) compared to the available
funds. We do this looking forward 3 years.
Microchip Technology is expected to efficiently use shareholders’ funds in the future (Return on Equity greater than 20%).
Microchip Technology's performance over the past 5 years by checking for:
Has earnings increased in past 5 years? (1 check)
Has the earnings growth in the last year exceeded that of the
industry? (1 check)
Is the recent earnings growth over the last year higher than the average annual growth over the
past 5 years? (1 check)
Is the Return on Equity (ROE) higher than 20%? (1 check)
Is the Return on Assets (ROA) above industry average? (1 check)
Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent
earnings report. Some checks require at least 3 or 5 years worth of data.
has a total score of
3/6, see the detailed checks below.
Note: We use GAAP Net Income excluding extraordinary items in all our calculations.
A company's financial position is much like your own financial position,
it includes everything you own
The boxes below represent the relative size of what makes up
Microchip Technology's finances.
The net worth of a company is the difference between its assets and liabilities.
Microchip Technology is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
Microchip Technology's long term commitments exceed its cash and other short term assets.
This treemap shows a more detailed breakdown of
Microchip Technology's finances. If any of them are yellow this
indicates they may be out of proportion and red means they relate to one of the
Liabilities and shares
The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
Low level of unsold assets.
Debt is not covered by short term assets, assets are 0.7x debt.
Nearly all companies have debt. Debt in itself isn’t
however if the debt is too high, or the company can’t afford to pay the interest
on its debts this may have impacts in the future.
The graphic below shows equity (available funds) and debt, we ideally want to
see the red area (debt) decreasing.
If there is any debt we look at the companies capability to repay it, and
whether the level has increased over the past 5 years.
Microchip Technology's level of debt (95.4%) compared to net worth is high (greater than 40%).
The level of debt compared to net worth has increased over the past 5 years (50.4% vs 95.4% today).
Debt is well covered by operating cash flow (45.5%, greater than 20% of total debt).
Interest payments on debt are well covered by earnings (EBIT is 5.4x coverage).
Management is one of the most important areas of a company. We look at
unreasonable CEO compensation, how long the team and board of directors have
been around for and insider trading.
TENURE AS CEO
Mr. Stephen Sanghi, also known as Steve, has been the Chief Executive Officer of Microchip Technology Incorporated since October 1991. Mr. Sanghi is employed by Microchip since February 1990. He served as the President of Microchip Technology Incorporated from August 1990 to February 3, 2016. He served as Acting Chief Executive Officer of FlipChip International, LLC from March 2013 to September 2013. He has held executive positions at Waferscale Integration, Inc., and Intel Corporation. He worked for Intel Corporation from 1978 to 1988 in various engineering and management positions, including General Manager of Intel's programmable memory operation. He has been the Chairman of Microchip Technology Incorporated since October 1993 and FlipChip International, LLC since September 2013. He serves as Chairman of FIRST. He served as the Chairman of Adflex Solutions Inc. since April 1999. He has been a Director of Standard Microsystems Corporation since August 2, 2012. He has been a Director of Microchip Technology Incorporated since August 1990. He has been a Director of Myomo, Inc. since October 2016. He serves as a Director of FlipChip International, LLC. He serves as a Director of United States Foundation For Inspiration And Recognition Of Science And Technology. He served as a Director of Xyratex Ltd. from May 2004 to March 31, 2014. He served as a Director of Adflex Solutions Inc. since June 1994. He served as a Director of Hittite Microwave Corporation from October 1, 2013 to July 22, 2014. Mr. Sanghi served as Member of the Board of Trustees of Kettering University in Flint, Michigan since September 2004. He served as a Director of Vivid Semiconductor Inc. and Artisoft. He served as a Director of FIRST Organization since May 2007. He is co-author of the book “Driving Excellence: How the Aggregate System Turned Microchip Technology from a Failing Company to a Market Leader (Wiley; April 2006). In June 1995, Mr. Sanghi received the Arizona Entrepreneur of the Year award. Mr. Sanghi holds a Bachelor of Science in Electronics and Electrical Communications Engineering from Punjab University, India in 1975 and holds an MS degree in Electrical and Computer Engineering from the University of Massachusetts in Amherst, Massachusetts.
Steve's compensation has been consistent with company performance over the past year.
Steve's compensation is higher than average for a company of this size and profit level.
Management Team Tenure
Average tenure and age of the
management team in years:
The average tenure for the Microchip Technology management team is over 5 years, this suggests they are a seasoned and experienced team.
CEO & Chairman
President & COO
VP & CFO
Vice President of Worldwide Sales & Applications
Vice President of MCU8 & Technology Development Division
VP & CFO
Kim van Herk
VP, General Counsel & Corporate Secretary
Vice President of Timing & Communication Group
Vice President of Human Resources
Vice President of Fab Operations
Board of Directors Tenure
Average tenure and age of the
board of directors in years:
The average tenure for the Microchip Technology board of directors is over 10 years, this suggests they are a seasoned and experienced board.
3 Days Left To Microchip Technology Incorporated (NASDAQ:MCHP)’s Ex-Dividend Date, Should Investors Buy?
Have you been keeping an eye on Microchip Technology Incorporated's (NASDAQ:MCHP) upcoming dividend of $0.36 per share payable on the 06 March 2018? … Check out our latest analysis for Microchip Technology 5 checks you should do on a dividend stock When researching a dividend stock, I always follow the following screening criteria: Is their annual yield among the top 25% of dividend payers? … NasdaqGS:MCHP Historical Dividend Yield Feb 16th 18 Does Microchip Technology pass our checks?
Are Microchip Technology Incorporated's (NASDAQ:MCHP) Interest Costs Too High?
Moreover, MCHP has generated cash from operations of $1,059.5M over the same time period, resulting in an operating cash to total debt ratio of 35.91%, indicating that MCHP’s operating cash is sufficient to cover its debt. … We can check to see whether MCHP is able to meet its debt obligations by looking at the net interest coverage ratio. … Next Steps: Although MCHP’s debt level is towards the higher end of the spectrum, its cash flow coverage seems adequate to meet obligations which means its debt is being efficiently utilised.
Microchip Technology Incorporated (NASDAQ:MCHP): What Can We Expect From Future Profit Margins?
To get some insight, this article will interpret Microchip Technology's margin performance to assist in analysing the revenue and cost anatomy behind the earnings expectations for the future and the impact it has on shareholder returns relative to the wider industry. … Margin Calculation for MCHP Profit Margin = Net Income ÷ Revenue ∴ Profit Margin = 603.99 Million ÷ 3.72 Billion = 16.23% The past five years have seen Microchip Technology's margin contract, with a positive 15.05% average growth in revenue and decline in net income of -2.05% on average, indicating that that a smaller percentage of revenue is being converted in to net income despite the top line growth. … Based on future expectations, MCHP's profit margin will shift towards expansion, with an expectation of 4.81% in annual revenue growth and 25.60% earnings growth expected annually.
Why Microchip Technology Incorporated (NASDAQ:MCHP) Could Be A Buy
Microchip Technology Incorporated (NASDAQ:MCHP) saw significant share price volatility over the past couple of months on the NasdaqGS, rising to the highs of $95.36 and falling to the lows of $85.47. … It’s trading around 1% above my intrinsic value, which means if you buy Microchip Technology today, you’d be paying a relatively reasonable price for it. … Furthermore, Microchip Technology’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta.
Estimating The Intrinsic Value Of Microchip Technology Incorporated (NASDAQ:MCHP)
5-year cash flow estimate 2017 2018 2019 2020 2021 Levered FCF ($, Millions) $813.00 $1,216.45 $1,376.53 $1,610.54 $1,868.23 Source Analyst x1 Analyst x6 Analyst x6 Extrapolated @ (17%, capped from 17.54%) Extrapolated @ (16%, capped from 17.54%) Present Value Discounted @ 10.16% $738.01 $1,002.39 $1,029.67 $1,093.59 $1,151.55 Present Value of 5-year Cash Flow (PVCF)= $5,015 We now need to calculate the Terminal Value, which accounts for all the future cash flows after the five years. … Terminal Value (TV) = FCF2021 × (1 + g) ÷ (r – g) = $1,868 × (1 + 2.5%) ÷ (10.2% – 2.5%) = $24,890 Present Value of Terminal Value (PVTV) = TV / (1 + r)5 = $24,890 / ( 1 + 10.2%)5 = $15,342 The total value, or equity value, is then the sum of the present value of the cash flows, which in this case is $20,357. … NasdaqGS:MCHP Intrinsic Value Dec 22nd 17 Important assumptions I'd like to point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows.
With An ROE Of 19.91%, Has Microchip Technology Incorporated's (MCHP) Management Done A Good Job?
Return on Equity = Net Profit ÷ Shareholders Equity ROE is measured against cost of equity in order to determine the efficiency of MCHP’s equity capital deployed. … Since MCHP’s return covers its cost in excess of 9.79%, its use of equity capital is efficient and likely to be sustainable. … This is called the Dupont Formula: Dupont Formula ROE = profit margin × asset turnover × financial leverage ROE = (annual net profit ÷ sales) × (sales ÷ assets) × (assets ÷ shareholders’ equity) ROE = annual net profit ÷ shareholders’ equity NasdaqGS:MCHP Last Perf Dec 12th 17 Essentially, profit margin shows how much money the company makes after paying for all its expenses.
Is December The Month To Buy Microchip Technology Incorporated (MCHP) For Your Growth Portfolio?
Microchip Technology is trading at price-to-earnings (PE) ratio of 32.31x, this tells us the stock is overvalued compared to the US market average ratio of 21.71x , and overvalued based on current earnings compared to the semiconductors and semiconductor equipment industry average of 25.16x. … However, since Microchip Technology is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. … Based on Microchip Technology's predicted 39.10% growth in earnings next year and PE ratio of 32.31x we see that Microchip Technology has a higher PEG ratio of 1.26x.
Interested In Microchip Technology Incorporated (MCHP)’s Upcoming $0.36 Dividend? You Have 3 Days Left
Important news for shareholders and potential investors in Microchip Technology Incorporated (NASDAQ:MCHP): The dividend payment of $0.36 per share will be distributed into shareholder on 05 December 2017, and the stock will begin trading ex-dividend at an earlier date, 20 November 2017. … View our latest analysis for Microchip Technology How I analyze a dividend stock Whenever I am looking at a potential dividend stock investment, I always check these five metrics: Is its annual yield among the top 25% of dividend-paying companies? … With these dividend metrics in mind, I definitely rank Microchip Technology as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy.
Should You Be Tempted To Sell Microchip Technology Incorporated (MCHP) Because Of Its PE Ratio?
Formula Price-Earnings Ratio = Price per share ÷ Earnings per share P/E Calculation for MCHP Price per share = 93.66 Earnings per share = 2.038 ∴ Price-Earnings Ratio = 93.66 ÷ 2.038 = 45.9x The P/E ratio isn’t a metric you view in isolation and only becomes useful when you compare it against other similar companies. … Ideally, we want to compare the stock’s P/E ratio to the average of companies that have similar characteristics as MCHP, such as size and country of operation. … For example, if you are inadvertently comparing riskier firms with MCHP, then MCHP’s P/E would naturally be higher than its peers since investors would reward its lower risk with a higher price.
Microchip Technology Incorporated develops, manufactures, and sells semiconductor products for various embedded control applications. The company offers general purpose and specialized 8-bit, 16-bit, and 32-bit microcontrollers; and microcontrollers for automotive networking, computing, lighting, power supplies, motor control, human machine interface, security, wired connectivity, and wireless connectivity. It also provides development tools that enable system designers to program microcontroller products for specific applications; analog, interface, mixed signal, and timing products comprising power management, linear, mixed-signal, high-voltage, thermal management, radio frequency (RF), drivers, safety, security, timing, USB, Ethernet, wireless, and other interface products; and memory products consisting of serial electrically erasable programmable read-only memory, serial flash memories, parallel flash memories, and serial static random access memories for the production of very small footprint devices. In addition, the company licenses its SuperFlash embedded flash and Smartbits one time programmable NVM technologies to foundries, integrated device manufacturers, and design partners for use in the manufacture of microcontroller products, gate array, RF, and analog products that require embedded non-volatile memory, as well as provides engineering services. Further, it provides wafer foundry and assembly and test subcontracting manufacturing services; and application specific integrated circuits, complex programmable logic devices, and aerospace products. It serves automotive, communications, computing, consumer, aerospace, defense, safety, security, medical, and industrial control markets. The company sells its products through a network of direct sales personnel and distributors in the Americas, Europe, and Asia. Microchip Technology Incorporated was founded in 1989 and is headquartered in Chandler, Arizona.
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