Head-To-Head Review: Microchip Technology (NASDAQ:MCHP) versus Power Integrations (NASDAQ:POWI)

Microchip Technology (NASDAQ:MCHP) and Power Integrations (NASDAQ:POWI) are both technology companies, but which is the better business? We will compare the two companies based on the strength of their profitability, valuation, dividends, earnings, analyst recommendations, institutional ownership and risk.

Profitability

This table compares Microchip Technology and Power Integrations’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Microchip Technology	9.34%	14.97%	6.80%
Power Integrations	9.81%	7.42%	6.47%

Insider and Institutional Ownership

91.5% of Microchip Technology shares are owned by institutional investors. 1.8% of Microchip Technology shares are owned by company insiders. Comparatively, 1.2% of Power Integrations shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Valuation and Earnings

This table compares Microchip Technology and Power Integrations”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Microchip Technology	$5.12 billion	6.87	$230.00 million	$0.67	96.79
Power Integrations	$443.50 million	4.89	$22.09 million	$0.79	49.16

Microchip Technology has higher revenue and earnings than Power Integrations. Power Integrations is trading at a lower price-to-earnings ratio than Microchip Technology, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Microchip Technology has a beta of 1.84, indicating that its stock price is 84% more volatile than the S&P 500. Comparatively, Power Integrations has a beta of 1.58, indicating that its stock price is 58% more volatile than the S&P 500.

Dividends

Microchip Technology pays an annual dividend of $1.82 per share and has a dividend yield of 2.8%. Power Integrations pays an annual dividend of $0.86 per share and has a dividend yield of 2.2%. Microchip Technology pays out 271.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Power Integrations pays out 108.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Microchip Technology has increased its dividend for 23 consecutive years and Power Integrations has increased its dividend for 12 consecutive years. Microchip Technology is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a breakdown of current recommendations for Microchip Technology and Power Integrations, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Microchip Technology	0	8	13	3	2.79
Power Integrations	0	4	4	0	2.50

Microchip Technology currently has a consensus price target of $93.67, suggesting a potential upside of 44.44%. Power Integrations has a consensus price target of $59.67, suggesting a potential upside of 53.62%. Given Power Integrations’ higher probable upside, analysts clearly believe Power Integrations is more favorable than Microchip Technology.

Summary

Microchip Technology beats Power Integrations on 14 of the 18 factors compared between the two stocks.

About Microchip Technology

Microchip Technology Incorporated engages in the development, manufacture, and sale of smart, connected, and secure embedded control solutions in the Americas, Europe, and Asia. The company offers general purpose 8-bit, 16-bit, and 32-bit mixed-signal microcontrollers; 32-bit embedded mixed-signal microprocessors; and specialized microcontrollers for automotive, industrial, computing, communications, lighting, power supplies, motor control, human machine interface, security, wired connectivity, and wireless connectivity applications. It also provides analog, interface, mixed signal, and timing products comprising power management, linear, mixed-signal, high-voltage, thermal management, discrete diodes, and metal oxide semiconductor field effect transistors (MOSFETS), radio frequency (RF), drivers, safety, security, timing, USB, Ethernet, wireless, and other interface products; field-programmable gate array (FPGA) products; and application development tools that enable system designers to program microcontroller, FPGA, and microprocessor products for specific applications. In addition, the company offers serial electrically erasable programmable read-only memory, serial flash memories, parallel flash memories, serial static random access memories, and serial electrically erasable random access memories for the production of very small footprint devices; and licenses its SuperFlash embedded flash and non-volatile memory technologies to foundries, integrated device manufacturers, and design partners for use in the manufacture of microcontroller products, gate array, RF, analog, and neuromorphic compute products that require embedded non-volatile memory, as well as provides engineering services. Further, it offers wafer foundry and assembly, and test subcontracting manufacturing services; and timing systems products, application specific integrated circuits, and aerospace products. The company was incorporated in 1989 and is headquartered in Chandler, Arizona.

About Power Integrations

Power Integrations, Inc. designs, develops, manufactures, and markets analog and mixed-signal integrated circuits (ICs), and other electronic components and circuitry used in high-voltage power conversion worldwide. The company provides a range of alternating current to direct current power conversion products that address power supply ranging from less than one watt of output to approximately 500 watts of output for mobile-device chargers, consumer appliances, utility meters, LCD monitors, main and standby power supplies for desktop computers and TVs, LED lighting, and various other consumer and industrial applications, as well as power conversion in high-power applications comprising industrial motors, solar and wind-power systems, electric vehicles, and high-voltage DC transmission systems. It also offers high-voltage diodes; InnoSwitch IC for electric vehicles; high-voltage gate-driver products used to operate high-voltage switches, such as insulated-gate bipolar transistors and silicon-carbide MOSFETs under the SCALE and SCALE-2 product-family names; and SCALE-iDriver for use in powertrain and charging applications for electric vehicles. In addition, the company provides motor-driver ICs for use in refrigerator compressors, ceiling fans, and air purifiers, as well as pumps, fans, and blowers used in consumer appliances, such as dishwashers and laundry machines. It serves communications, computer, consumer, and industrial markets. The company sells its products to original equipment manufacturers and merchant power supply manufacturers through direct sales staff, as well as a network of independent sales representatives and distributors. Power Integrations, Inc. was incorporated in 1988 and is headquartered in San Jose, California.