Strong On High Relative Volume: Microchip Technology (MCHP)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified Microchip Technology ( MCHP) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Microchip Technology as such a stock due to the following factors:

  • MCHP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $90.8 million.
  • MCHP has traded 369,993 shares today.
  • MCHP is trading at 6.19 times the normal volume for the stock at this time of day.
  • MCHP is trading at a new high 4.01% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on MCHP:

Microchip Technology Incorporated develops, manufactures, and sells semiconductor products for various embedded control applications. The stock currently has a dividend yield of 3%. MCHP has a PE ratio of 27.6. Currently there are 2 analysts that rate Microchip Technology a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Microchip Technology has been 2.4 million shares per day over the past 30 days. Microchip Technology has a market cap of $9.5 billion and is part of the technology sector and electronics industry. The stock has a beta of 1.22 and a short float of 10.8% with 10.57 days to cover. Shares are up 4.4% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Microchip Technology as a 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, good cash flow from operations, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • MCHP's revenue growth has slightly outpaced the industry average of 0.5%. Since the same quarter one year prior, revenues slightly increased by 9.6%. 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.
  • The debt-to-equity ratio is somewhat low, currently at 0.60, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with this, the company maintains a quick ratio of 3.87, which clearly demonstrates the ability to cover short-term cash needs.
  • Net operating cash flow has increased to $184.84 million or 20.12% when compared to the same quarter last year. In addition, MICROCHIP TECHNOLOGY INC has also modestly surpassed the industry average cash flow growth rate of 15.93%.
  • MICROCHIP TECHNOLOGY INC's earnings per share declined by 18.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MICROCHIP TECHNOLOGY INC increased its bottom line by earning $1.81 versus $0.61 in the prior year. This year, the market expects an improvement in earnings ($2.66 versus $1.81).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market on the basis of return on equity, MICROCHIP TECHNOLOGY INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.

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