Chip stock Monolithic Power Systems is nearing a buy point of a base and is Thursday's IBD 50 Stocks To Watch pick. It joined Leaderboard's elite IBD 50 Top 10 list on Wednesday.
Monolithic Power is a "fabless" semiconductor engineer and designer. Fabless designers outsource their chip manufacturing to third parties.
The company's product line includes modules, converters, battery chargers, analog products, motor drivers, sensors and inductors for electronic systems. These components are used in industrial, automotive, biomedical, robotics, cloud computing, telecom and consumer applications.
The semiconductor stock holds the top spot out of 34 stocks in the Electronics-Semiconductor Fabless group, which ranks 37th out of 197 IBD industry groups. The group rose quickly from a No. 101 rank four weeks ago.
Chip Stock Nears Buy Point
Based in Washington state, Monolithic Power is in a long, deep cup base and nearing the 541.49 buy point, according to MarketSmith pattern recognition.
This chip stock gapped up 10.2% in heavy volume Feb. 9 after a well-received Q4 earnings release. In addition, MPWR is near the 52-week high of 541.39, posted in August 2022.
Earnings Grew 50% In Latest Quarter
Monolithic posted better-than-expected Q4 earnings. It gave Q1 revenue guidance ranging between $440 million and $460 million, with the top end close to December's $460 million in sales.
Earnings grew an impressive 50%, but were still down from 71% and 80% in the two prior quarters. Full-year 2022 EPS grew 66.6% year over year to $12.41, from $7.45 in 2021. Analysts now expect 6% annualized EPS growth in 2023, increasing to 18% in 2024.
Sales grew 37%, decelerating from 53% and 57% in the past two quarters, while full-year revenue grew 48.5% year over year. The chip stock has booked 50% EPS and 44% sales growth in the last three years, according to IBD Stock Checkup.
It has also earned a 92 Relative Strength Rating, outperforming 92% of stocks in the IBD database, up from 86 a week ago.
Finally, the company just raised its dividend from 75 cents to $1 per share, payable to shareholders of record as of March 31.
Institutions Scooping Up Chip Stock
The number of mutual funds owning shares dropped to 1,684 in December from 1,723 in September. But total ownership stands at an impressive 70%. The CAN SLIM investing strategy looks for increasing institutional ownership, as big money managers can push up the stock price.
MPWR also holds a high "B+" Accumulation/Distribution Rating, which measures institutional buying and selling over the last 13 weeks.
Committed To Corporate Social Responsibility
Monolithic participates in the Responsible Business Alliance (RBA), the world's largest industry organization of corporate social responsibility for global supply chains.
The chipmaker's integrated solutions increase energy savings and power density for electric vehicles. Their power-saving consumer products include "smart-home" and building applications, including HVAC systems, meters, remote controls, cameras and smoke detectors.
Follow Kimberley Koenig for more stock news on Twitter @IBD_KKoenig.
