Is Microchip Technology, Inc. overvalued or undervalued?

As of 8 May 2025, the valuation grade for Microchip Technology, Inc. has moved from expensive to risky, indicating a shift towards greater uncertainty regarding its valuation. The company appears to be overvalued, particularly highlighted by its P/E ratio of 458, which is significantly higher than the peer average of 43.385. Additionally, the EV to EBITDA ratio stands at 108.47, further emphasizing the company's inflated valuation compared to its earnings potential.
In comparison to its peers, Microchip Technology, Inc. shows a stark contrast with its high valuation metrics, such as a Price to Book Value of 5.06 and an EV to Sales ratio of 9.25. Notable peers in the industry include companies with more reasonable valuations, reinforcing the perception of Microchip's overvaluation. Furthermore, while the stock has outperformed the S&P 500 on a year-to-date basis with a return of 15.54% compared to 12.22%, it has underperformed over the longer term, particularly in the past year with a decline of 13.23% against the S&P 500's gain of 17.14%.