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 upgraded by TheStreet Ratings from hold to buy. 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. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.
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- The revenue growth came in higher than the industry average of 10.8%. 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.
- MICROCHIP TECHNOLOGY INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, MICROCHIP TECHNOLOGY INC reported lower earnings of $1.66 versus $2.20 in the prior year. This year, the market expects an improvement in earnings ($1.76 versus $1.66).
- The gross profit margin for MICROCHIP TECHNOLOGY INC is rather high; currently it is at 56.80%. Regardless of MCHP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MCHP's net profit margin of -5.52% significantly underperformed when compared to the industry average.
- Net operating cash flow has significantly decreased to $63.30 million or 59.09% when compared to the same quarter last year. Despite a decrease in cash flow MICROCHIP TECHNOLOGY INC is still fairing well by exceeding its industry average cash flow growth rate of -93.25%.
-- Written by a member of TheStreet Ratings Staff