What’s Behind Microchip Technology Stock’s 3x Rally Since Late 2017?
Microchip Technology Inc. (NASDAQ: MCHP) stock price jumped around 3.2x from $22 in 2017 end, to over $70 currently, primarily due to favorable changes in its P/S multiple and revenues. Additionally, the company witnessed a strong rise in revenue per share over this period, 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 223% Since 2017, we break down the factors behind this move.
(A) Microchip’s Total Revenue has grown 86% from $3.9 billion in FY 2018 to $7.2 billion currently
- Microchip’s total revenue has risen strongly from $3.9 billion in FY ’18 to $6.8 billion in FY ’22 (MCHP’s fiscal year ends in March), and currently stands even higher at $7.2 billion.
- 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 revenue and comparison to peers, see Microchip Technology (MCHP) Revenue Comparison
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(B) Revenue per share (RPS) increased 57% from $8.35 in FY 2018 to $13.09 currently
- Microchip Technology revenue rose from $3.9 billion in FY 2018 to $7.2 billion currently, while the outstanding share count increased from around 464.4 million in FY 2018 to just a little over 551 million currently.
- Due to this, RPS has jumped from $8.35 in FY ’18 to $13.09 currently.
(C) Price-To-Sales (P/S) multiple for Microchip Technology rose strongly from 3.1x in 2017 end to 8.8x by 2021 end, but has pulled back to 5.4x currently, still around 1.7x higher than what it was in late 2017
- Microchip’s P/S multiple rose strongly to 8.8x by late 2021, on the back of rising investor expectations surrounding a revival in sales growth amidst rising demand for the company’s products.
- However, due to current geopolitical tensions and the increased economic uncertainty weighing on the broader markets, the P/S multiple has pulled back, currently standing at around 5.4x.
- For additional details about the company stock returns and comparison to peers, see Microchip Technology (MCHP) Stock Return Comparison.
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| Returns | Aug 2022 MTD [1] |
2022 YTD [1] |
2017-22 Total [2] |
| MCHP Return | 3% | -18% | 343% |
| S&P 500 Return | 0% | -13% | 85% |
| Trefis Multi-Strategy Portfolio | 3% | -11% | 251% |
[1] Month-to-date and year-to-date as of 8/5/2022
[2] Cumulative total returns since the end of 2016
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