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

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.

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 Operating Income Comparison

Revenue per share 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.

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 Stock Return Comparison.

Stock prices have fallen precipitously across sectors over recent months and we are now in a bear market for the first time since March 2020, when the Covid-19 outbreak triggered a market crash. We capture key trends in the Dow during and after major market crashes in our interactive dashboard analysis, ‘Market Crashes Compared.'

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