Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model. NEW YORK ( TheStreet) -- Microchip Technology (Nasdaq: MCHP) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.
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- The revenue growth came in higher than the industry average of 4.2%. Since the same quarter one year prior, revenues rose by 12.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Despite currently having a low debt-to-equity ratio of 0.49, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 5.48 is very high and demonstrates very strong liquidity.
- 43.40% is the gross profit margin for MICROCHIP TECHNOLOGY INC which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, MCHP's net profit margin of -5.50% significantly underperformed when compared to the industry average.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. When compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, MICROCHIP TECHNOLOGY INC's return on equity is below that of both the industry average and the S&P 500.
-- Written by a member of TheStreet Ratings Staff