Yahoo Finance Is Now The Time To Put Microchip Technology (NASDAQ:MCHP) On Your Watchlist?
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Microchip Technology (NASDAQ:MCHP). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Microchip Technology with the means to add long-term value to shareholders.
View our latest analysis for Microchip Technology
How Fast Is Microchip Technology Growing Its Earnings Per Share?
Over the last three years, Microchip Technology has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. Microchip Technology boosted its trailing twelve month EPS from US$3.75 to US$4.36, in the last year. That's a 16% gain; respectable growth in the broader scheme of things.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Microchip Technology shareholders can take confidence from the fact that EBIT margins are up from 35% to 37%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
Fortunately, we've got access to analyst forecasts of Microchip Technology's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Microchip Technology Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$46b company like Microchip Technology. But we are reassured by the fact they have invested in the company. We note that their impressive stake in the company is worth US$964m. This suggests that leadership will be very mindful of shareholders' interests when making decisions!
Should You Add Microchip Technology To Your Watchlist?
One positive for Microchip Technology is that it is growing EPS. That's nice to see. To add an extra spark to the fire, significant insider ownership in the company is another highlight. The combination definitely favoured by investors so consider keeping the company on a watchlist. Even so, be aware that Microchip Technology is showing 3 warning signs in our investment analysis , and 1 of those is potentially serious...
There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of companies which have demonstrated growth backed by recent insider purchases.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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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.
