Contrasting Microchip Technology (MCHP) & Xilinx (XLNX)

Microchip Technology (NASDAQ: MCHP) and Xilinx (NASDAQ:XLNX) are both large-cap computer and technology companies, but which is the superior investment? We will compare the two businesses based on the strength of their earnings, risk, institutional ownership, profitability, analyst recommendations, valuation and dividends.

Profitability

This table compares Microchip Technology and Xilinx’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Microchip Technology 12.53% 34.33% 13.56%
Xilinx 26.22% 24.70% 12.78%

Institutional and Insider Ownership

97.4% of Xilinx shares are owned by institutional investors. 2.1% of Microchip Technology shares are owned by insiders. Comparatively, 0.4% of Xilinx shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Volatility and Risk

Microchip Technology has a beta of 1.07, indicating that its share price is 7% more volatile than the S&P 500. Comparatively, Xilinx has a beta of 1.1, indicating that its share price is 10% more volatile than the S&P 500.

Dividends

Microchip Technology pays an annual dividend of $1.45 per share and has a dividend yield of 1.6%. Xilinx pays an annual dividend of $1.40 per share and has a dividend yield of 1.9%. Microchip Technology pays out 77.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Xilinx pays out 60.1% of its earnings in the form of a dividend. Microchip Technology has increased its dividend for 15 consecutive years and Xilinx has increased its dividend for 6 consecutive years. Xilinx is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares Microchip Technology and Xilinx’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Microchip Technology $3.58 billion 5.97 $1.25 billion $1.87 49.14
Xilinx $2.39 billion 7.56 $755.86 million $2.33 31.18

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

Analyst Ratings

This is a summary of current ratings and recommmendations for Microchip Technology and Xilinx, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Microchip Technology 0 5 13 0 2.72
Xilinx 2 12 8 0 2.27

Microchip Technology currently has a consensus price target of $90.88, indicating a potential downside of 1.10%. Xilinx has a consensus price target of $65.63, indicating a potential downside of 9.67%. Given Microchip Technology’s stronger consensus rating and higher possible upside, equities analysts plainly believe Microchip Technology is more favorable than Xilinx.

Summary

Microchip Technology beats Xilinx on 9 of the 17 factors compared between the two stocks.

Microchip Technology Company Profile

Microchip Technology Incorporated is engaged in developing, manufacturing and selling specialized semiconductor products used by its customers for a range of embedded control applications. The Company operates through two segments: semiconductor products and technology licensing. In the semiconductor products segment, the Company designs, develops, manufactures and markets microcontrollers, development tools and analog, interface, mixed signal and timing products. Its functional activities include sales, marketing, manufacturing, information technology, human resources, legal and finance. Its product portfolio comprises general purpose and specialized 8-bit, 16-bit, and 32-bit microcontrollers, a spectrum of linear, mixed-signal, power management, thermal management, radio frequency (RF), timing, safety, security, wired connectivity and wireless connectivity devices, as well as serial electrically erasable programmable read-only memories (EEPROMs) and serial flash memories.

Xilinx Company Profile

Xilinx, Inc. (Xilinx) is engaged in designing and developing programmable devices and associated technologies. The Company’s programmable devices and associated technologies include integrated circuits (ICs) in the form of programmable logic devices (PLDs), including programmable System on Chips (SoCs) and three-dimensional ICs (3D ICs); software design tools to program the PLDs; targeted reference designs; printed circuit boards, and intellectual property (IP), which consists of Xilinx, and various third-party verification and IP cores. The Company provides design services, customer training, field engineering and technical support. Its PLDs include field programmable gate arrays (FPGAs), complex programmable logic devices (CPLDs) that its customers program to perform desired logic functions, and programmable SoCs, which combine (Advanced reduced instruction set computing (RISC) Machines (ARM)) processor-based systems with programmable logic in a single device.

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