Investment Thesis Summary
At $98 per share, Microchip trades at 18x FY18A earnings, 15x FY19E earnings, and 13.8x FY20E earnings. Note that FY19 for Microchip ends March 2019, so it is prudent to value Microchip stock at FY20E earnings. Historically, Microchip has traded at a three- and five-year forward P/E of 16.5x and 17x, respectively. This may be low compared to Texas Instruments (18x) and the potential growth of the Internet of Things (IoT). At 15x my forward earnings projection (to reflect the leveraged balance sheet), Microchip’s price should be $106. This implies a 10%+