Analyzing Skyworks Solutions (NASDAQ:SWKS) and Microchip Technology (NASDAQ:MCHP)

Skyworks Solutions (NASDAQ:SWKS) and Microchip Technology (NASDAQ:MCHP) are both large-cap computer and technology companies, but which is the better stock? We will contrast the two companies based on the strength of their valuation, analyst recommendations, risk, earnings, institutional ownership, profitability and dividends.

Insider & Institutional Ownership

81.6% of Skyworks Solutions shares are held by institutional investors. 0.6% of Skyworks Solutions shares are held by insiders. Comparatively, 2.2% of Microchip Technology shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Volatility and Risk

Skyworks Solutions has a beta of 1.25, meaning that its share price is 25% more volatile than the S&P 500. Comparatively, Microchip Technology has a beta of 1.37, meaning that its share price is 37% more volatile than the S&P 500.

Earnings & Valuation

This table compares Skyworks Solutions and Microchip Technology’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Skyworks Solutions $3.38 billion 4.68 $853.60 million $5.71 16.28
Microchip Technology $5.35 billion 3.34 $355.90 million $6.08 12.26

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

Dividends

Skyworks Solutions pays an annual dividend of $1.76 per share and has a dividend yield of 1.9%. Microchip Technology pays an annual dividend of $1.47 per share and has a dividend yield of 2.0%. Skyworks Solutions pays out 30.8% of its earnings in the form of a dividend. Microchip Technology pays out 24.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Skyworks Solutions has raised its dividend for 5 consecutive years and Microchip Technology has raised its dividend for 18 consecutive years. Microchip Technology is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

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

Net Margins Return on Equity Return on Assets
Skyworks Solutions 25.02% 23.03% 19.53%
Microchip Technology 12.23% 23.87% 7.14%

Analyst Ratings

This is a breakdown of current recommendations for Skyworks Solutions and Microchip Technology, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Skyworks Solutions 0 7 20 0 2.74
Microchip Technology 0 5 13 1 2.79

Skyworks Solutions presently has a consensus target price of $117.49, indicating a potential upside of 26.39%. Microchip Technology has a consensus target price of $110.73, indicating a potential upside of 48.60%. Given Microchip Technology’s stronger consensus rating and higher probable upside, analysts clearly believe Microchip Technology is more favorable than Skyworks Solutions.

Summary

Microchip Technology beats Skyworks Solutions on 12 of the 18 factors compared between the two stocks.

About Skyworks Solutions

Skyworks Solutions, Inc., together with its subsidiaries, designs, develops, manufactures, and markets proprietary semiconductor products, including intellectual property worldwide. Its product portfolio includes amplifiers, antenna tuners, attenuators, circulators/isolators, DC/DC converters, demodulators, detectors, diodes, directional couplers, diversity receive modules, filters, front-end modules, hybrids, LED drivers, low noise amplifiers, mixers, modulators, optocouplers/optoisolators, phase locked loops, phase shifters, power dividers/combiners, receivers, switches, synthesizers, technical ceramics, voltage controlled oscillators/synthesizers, and voltage regulators. The company provides its products for use in the aerospace, automotive, broadband, cellular infrastructure, connected home, industrial, medical, military, smartphone, tablet, and wearable markets. It sells its products through direct sales force, electronic component distributors, and independent sales representatives. Skyworks Solutions, Inc. has a collaboration agreement with MediaTek Incorporated to deliver standards-based 5G solution. The company was founded in 1962 and is headquartered in Woburn, Massachusetts.

About Microchip Technology

Microchip Technology Incorporated develops, manufactures, and sells semiconductor products for various embedded control applications. The company offers general purpose and specialized 8-bit, 16-bit, and 32-bit microcontrollers; 32-bit microprocessors; and microcontrollers for automotive networking, computing, lighting, power supplies, motor control, human machine interface, security, wired connectivity, and wireless connectivity. It also provides development tools that enable system designers to program microcontroller products for specific applications; analog, interface, mixed signal, and timing products comprising power management, linear, mixed-signal, high-voltage, thermal management, radio frequency (RF), drivers, safety, security, timing, USB, Ethernet, wireless, and other interface products; and memory products consisting of serial electrically erasable programmable read-only memory, serial flash memories, parallel flash memories, and serial static random access memories for the production of very small footprint devices. In addition, the company licenses its SuperFlash embedded flash and Smartbits one time programmable NVM technologies to foundries, integrated device manufacturers, and design partners for use in the manufacture of microcontroller products, gate array, RF, and analog products that require embedded non-volatile memory, as well as provides engineering services. Further, it provides wafer foundry and assembly and test subcontracting manufacturing services; and application specific integrated circuits, complex programmable logic devices, and aerospace products. It serves automotive, communications, computing, consumer, aerospace, defense, safety, security, medical, and industrial control markets. The company sells its products through a network of direct sales personnel and distributors in the Americas, Europe, and Asia. Microchip Technology Incorporated was founded in 1989 and is headquartered in Chandler, Arizona.

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