MPWR – Market expectations are for Uniform ROA to expand to new highs, but management may have concerns about capacity and growth

March 16, 2022

  • Monolithic Power Systems (MPWR) currently trades above corporate and historical averages relative to Uniform earnings, with a 50.3x Uniform P/E (Fwd. V/E’).
  • At these levels, markets are pricing in expectations for Uniform ROA to expand to a record-high of 48%, accompanied by 9% Uniform asset growth.
  • Meanwhile, analysts expect Uniform ROA to only improve to 27% by 2023, accompanied by 22% Uniform asset growth.
  • If sustained going forward, these levels would imply a stock price closer to $368, representing 11% equity downside for the firm.
  • Moreover, the firm’s most recent earnings call suggests management may have concerns about capacity and growth.

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