Texas Instruments (NASDAQ:TXN) and Microchip Technology (NASDAQ:MCHP) are both large-cap computer and technology companies, but which is the better stock? We will contrast the two businesses based on the strength of their risk, valuation, analyst recommendations, profitability, earnings, dividends and institutional ownership.
Institutional and Insider Ownership
83.1% of Texas Instruments shares are held by institutional investors. Comparatively, 94.1% of Microchip Technology shares are held by institutional investors. 0.7% of Texas Instruments shares are held by company insiders. Comparatively, 2.2% of Microchip Technology shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.
Analyst Ratings
This is a breakdown of current ratings and target prices for Texas Instruments and Microchip Technology, as provided by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
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Texas Instruments | 4 | 9 | 13 | 0 | 2.35 |
Microchip Technology | 0 | 5 | 20 | 1 | 2.85 |
Texas Instruments presently has a consensus price target of $154.6154, suggesting a potential downside of 10.53%. Microchip Technology has a consensus price target of $134.6250, suggesting a potential downside of 10.33%. Given Microchip Technology's stronger consensus rating and higher possible upside, analysts plainly believe Microchip Technology is more favorable than Texas Instruments.
Profitability
This table compares Texas Instruments and Microchip Technology's net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
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Texas Instruments | 36.24% | 61.05% | 28.06% |
Microchip Technology | 11.62% | 25.02% | 8.05% |
Volatility and Risk
Texas Instruments has a beta of 1.06, indicating that its share price is 6% more volatile than the S&P 500. Comparatively, Microchip Technology has a beta of 1.69, indicating that its share price is 69% more volatile than the S&P 500.
Dividends
Texas Instruments pays an annual dividend of $4.08 per share and has a dividend yield of 2.4%. Microchip Technology pays an annual dividend of $1.47 per share and has a dividend yield of 1.0%. Texas Instruments pays out 77.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Microchip Technology pays out 28.4% of its earnings in the form of a dividend. Texas Instruments has increased its dividend for 16 consecutive years and Microchip Technology has increased its dividend for 17 consecutive years.
Valuation & Earnings
This table compares Texas Instruments and Microchip Technology's top-line revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
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Texas Instruments | $14.38 billion | 11.03 | $5.02 billion | $5.24 | 32.98 |
Microchip Technology | $5.27 billion | 7.41 | $570.60 million | $5.18 | 28.98 |
Texas Instruments has higher revenue and earnings than Microchip Technology. Microchip Technology is trading at a lower price-to-earnings ratio than Texas Instruments, indicating that it is currently the more affordable of the two stocks.
Summary
Microchip Technology beats Texas Instruments on 10 of the 18 factors compared between the two stocks.