Is Microchip Technology, Inc. overvalued or undervalued?

As of 8 May 2025, the valuation grade for Microchip Technology, Inc. has moved from very expensive to risky. The company appears to be overvalued, given its P/E ratio of 458, which is significantly higher than the industry average. Additionally, the EV to EBIT ratio stands at 108.47, while the EV to EBITDA ratio is at 36.18, both indicating a high valuation relative to earnings.
In comparison to its peers, Microchip Technology's P/E ratio is substantially higher than NVIDIA Corp.'s 46.24 and Broadcom Inc.'s 81.42, both of which are considered expensive. The company's ROCE of 3.14% and ROE of 1.11% further highlight its inefficiency in generating returns relative to its high valuation metrics. Notably, while Microchip has shown a strong 22.05% return over the past month compared to the S&P 500's 3.83%, its one-year return of -25.11% suggests underlying challenges that reinforce the notion of overvaluation.