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MPWR – Market expectations are for Uniform ROA to expand, but management may have concerns about a market slowdown, their margin guidance, and inventory levels

December 16, 2020

  • Monolithic Power Systems, Inc. (MPWR:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 72.7x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may have concerns about a market slowdown, their gross margin guidance, and inventory levels
  • Specifically, management may have concerns about the expected delinquencies from a market slowdown and the impact of regulatory policies. In addition, they may have concerns about the sustainability of wins related to high-value products and the recent uptick in clicks in their e-commerce business. Finally, they may lack confidence in their ability to find talent internationally, improve inventory levels for future growth, and meet their gross margin guidance