What’s Behind Microchip Technology Stock’s Stellar Outperformance Since 2018?

MCHP: Microchip Technology logo
MCHP
Microchip Technology

Microchip Technology Inc. (NASDAQ: MCHP) stock price jumped around 3.3x from $18 in 2018 end, to almost $60 currently, primarily due to favorable changes in its P/S multiple. Additionally, the company witnessed a strong rise in revenue over this period, and revenue per share has increased, despite a substantial rise in the outstanding share count. This has enabled the stock to strongly outperform the S&P, which has risen just around 50% in comparison over this period.

In our interactive dashboard, Why Microchip Technology Stock Moved: MCHP Stock Has Gained 230% Since 2018, we break down the factors behind this move.

(A) Microchip’s Total Revenue has grown 28% from $5.3 billion in FY 2019 to $6.8 billion currently

  • Microchip’s total revenue has risen strongly from $5.3 billion in FY ’19 to $6.8 billion in FY ’22 (MCHP’s fiscal year ends in March), and currently stands at around the same level.
  • As of FY ’22, Microchip’s largest segment is Semiconductor Products, contributing $6.7 billion to total sales, making up over 98% of the company’s revenues, with Technology Licensing sales making up the remaining 2%.
  • While total sales were roughly stagnant between FY ’19 and FY ’21, growth has taken off since, and FY ’22 sales stand almost 1.3x higher than FY ’21 sales.
  • For details about Microchip operating income and comparison to peers, see Microchip Technology (MCHP) Operating Income Comparison
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(B) Revenue per share (RPS) increased 8.4% from $11.35 in FY ’19 to $12.31 currently

  • MCHP revenue rose from $5.3 billion in FY ’19 to $6.8 billion currently, while the outstanding share count increased from 471.4 million in FY ’19 to 554.3 million currently.
  • Due to this, RPS has risen from $11.35 in FY ’19 to $12.31 currently.

(C) Price-To-Sales (P/S) multiple for Microchip rose from 1.9x in 2018-end to 8.9x by 2021 end, but has pulled back to 4.8x currently, still around 2.5x higher than its 2018 level

  • Due to MCHP’s stellar performance since 2018-end, its P/S multiple rose strongly from 1.9x in 2018-end to as high as 8.9x in 2021.
  • However, due to the increased economic uncertainty weighing on the broader markets and the slowing rate of sales growth, the P/S multiple has pulled back, currently standing at around 4.8x.
  • For additional details about the company stock returns and comparison to peers, see Microchip Technology (MCHP) Stock Return Comparison.

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Returns Jun 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 MCHP Return -18% -32% 270%
 S&P 500 Return 2% -22% 88%
 Trefis Multi-Strategy Portfolio -9% -26% 189%

[1] Month-to-date and year-to-date as of 6/21/2022
[2] Cumulative total returns since the end of 2016

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