Is It Too Late To Consider Buying Microchip Technology Incorporated (NASDAQ:MCHP)?

Let's talk about the popular Microchip Technology Incorporated (NASDAQ:MCHP). The company's shares saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$99.49 and falling to the lows of US$81.68. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Microchip Technology's current trading price of US$86.83 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Microchip Technology’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Microchip Technology

Is Microchip Technology Still Cheap?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 17% below our intrinsic value, which means if you buy Microchip Technology today, you’d be paying a reasonable price for it. And if you believe the company’s true value is $104.29, then there isn’t much room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Microchip Technology’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Microchip Technology look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of Microchip Technology, it is expected to deliver a relatively unexciting earnings growth of 7.1%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What This Means For You

Are you a shareholder? MCHP’s future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on MCHP, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Microchip Technology at this point in time. For example - Microchip Technology has 2 warning signs we think you should be aware of.

If you are no longer interested in Microchip Technology, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com