August 1, 2019

MPWR – Market expectations are for Uniform ROA to expand, but management has concerns about margins, e-commerce, and growth


  • Monolithic Power Systems, Inc. (MPWR:USA) currently trades above historical averages relative to UAFRS-based (Uniform) Earnings, with a 34.6x Uniform P/E, implying bullish expectations for the firm. However, management has concerns about their ability to improve margins, drive e-commerce traffic, and maintain recent growth
  • Specifically, management appears concerned about their ability to drive activity on their e-commerce platform and to win all of their upcoming contracts. Furthermore, they may lack confidence in their ability to sustain revenue and improve margins in their industrial and automotive parts businesses. Moreover, they may be concerned about the sustainability of growth in their industrial portfolio, and they may be concerned about continued pressure to inventory days outstanding. Additionally, they may be concerned about sustained headwinds in the automotive space and about their ability to drive incremental growth in ADAS and lighting. Finally, they may have concerns about the growth of higher margin 5G networks, and they may lack confidence in their ability to improve margins in the residential gateway business.
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