Monolithic Power Systems, Inc. (MPWR) in San Jose, Calif., designs, develops, and markets integrated power semiconductor solutions and power delivery architectures for computing and storage, automotive, industrial, communications, and consumer applications markets. MPWR shares have gained 63.8% in price over the past year and 37.5% year-to-date to close its last trading session at $503.41. They are currently trading above their 200-day moving average but below their 50-day moving average. The stock is trading 13.2% below its 52-week high of $580.00, which it hit on November 22. MPWR has slumped 6.4% in price over the past month. Of the seven Wall Street analysts that rated the stock, six have rated it Buy, while one rated it Hold. Its $597.17 12-month median price target indicates a potential 18.6% upside from their last trading price.
The semiconductor industry has experienced robust demand over the past few months. With substantial investments–and as the chip shortage is gradually eases–the Semiconductor Industry Association (SIA) predicts annual global sales to increase 25.6% in 2021 and 8.8% in 2022, exceeding $600 billion in 2022. The anticipated robust demand bodes well for MPWR because the company is well-positioned to capitalize on the growing semiconductor market.
Furthermore, MPWR’s $2.40 annual dividend yields 0.48% at its current share price. On September 15, the company announced its third-quarter dividend of $0.60 per common share, which was to be paid on October 15, 2021. MPWR’s dividend payouts have increased at a 27.9% CAGR over the past three years and a 23.5% CAGR over the past five years.
Here is what could shape MPWR’s performance in the near term:
Higher-Than-Industry Profit Margins
MPWR’s 56.18% gross profit margin is 13.7% higher than the 49.42% industry average. Also, its 19.22% net income margin is 200.3% higher than the 6.40% industry average.
And MPWR’s 20.43%, 14.19%, and 13.90% respective ROE, ROA, and ROTC are 146.6%, 292.3%, and 179.7% higher than the industry averages.
Solid Third-Quarter Earnings Report
MPWR’s revenues increased 24.7% year-over-year to $323.52 million in its fiscal third quarter ended September 30. Its income from operations stood at $77.13 million, up 28.6% from the same period last year. And its non-GAAP net income grew 24.3% from its year-ago value to $98.63 million. The company’s EPS increased 21.9% year-over-year to $2.06.
Stable Growth Prospects
Analysts expect MPWR’s revenues to increase 37.1% in the current quarter and 31.4% in the next quarter. Also, its revenue is expected to grow 41% year-over-year to $1.19 billion in the current year. The company’s EPS is expected to rise 42.7% in the current quarter and 25.3% in the next quarter. The Street expects MPWR’s EPS to rise 42.9% year-over-year to $7.20 in the current year. The company’s EPS is expected to grow 25% per annum over the next five years.
POWR Ratings Show Promise
MPWR has an overall B rating, which translates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a B grade for Quality. Its higher-than-industry profit margins justify this grade.
MPWR has a B grade for Growth, which is consistent with its stable rise in financials in its last reported quarter.
Of the 100 stocks in the Semiconductor & Wireless Chip industry, MPWR is ranked #55.
Beyond what I have stated above, one can view MPWR’s grades for Value, Sentiment, Momentum, and Stability here.
View the top-rated stocks in the A-rated Semiconductor & Wireless Chip industry here.
Although the company’s shares have declined in price in the past month, Wall Street analysts see a potential upside in the near term. Furthermore, robust semiconductor demand and analysts’ sales growth expectations should bode well for the company. In addition, we think the company’s significantly higher than industry profit margins make it an ideal bet now.
How Does Monolithic Power Systems, Inc. (MPWR) Stack Up Against its Peers?
MPWR has an overall POWR Rating of B. However, one could also check out these other stocks within the Semiconductor & Wireless Chip industry with A (Strong Buy) rating: Broadcom Inc. (AVGO), Semtech Corporation (SMTC), and inTest Corporation (INTT).
Recently the Reitmeister Total Return Portfolio (RTR) closed a winning trade in AVGO for a 25% gain. Learn more about the RTR service here.
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MPWR shares were unchanged in premarket trading Monday. Year-to-date, MPWR has gained 38.09%, versus a 27.33% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...
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