Monolithic Power Systems Inc (MPWR)

Conclusion

Monolithic Power Systems designs semiconductor power electronics that convert and control voltage in cloud and on-premises servers, AI systems, memory and storage, notebooks, automotive, communications and industrial equipment, selling mainly through distributors and resellers. The stock closed at 1388.05 USD on 9 November 2026, giving a market capitalisation of 67.7 billion USD.

The verdict is overvalued. Today's P/E of 75.9 sits close to its ten-year median of 74.2, but the P/FCF of 111.1 compares with a median of 67.4. The discounted cash flow gives 268.70 USD per share at a 13.5% discount rate. The fair value band runs from 486.66 to 729.99 USD with a midpoint of 608.32 USD, a margin of safety of -56.2% at the current price. The reverse DCF implies growth of 40.3% a year, against 27.0% revenue growth and 25.0% free cash flow per share growth over five years.

The strongest supports are a current ratio of 3.70, an operating margin of 29.5% against a ten-year median of 20.6%, and revenue growth in all ten of the last ten years. The weakest numbers are the free cash flow yield of 0.9%, the P/FCF premium of 64.7% over its median, and the gap between the current price and the DCF value of 268.70 USD. A slowdown in the growth the price already assumes would be the main risk to the case.

Financial health

Financial strength is green, held up by a current ratio of 3.70 and a quick ratio of 2.42, and an Altman Z-score of 46.2 in the safe zone. The Altman model was designed for manufacturers, so its reading is an approximation for this company. The company's debt is not in the data, so net debt to EBITDA, debt to equity and interest coverage are not available, and the company does not report its interest expense. Insolvency risk: low, about 0.01% by the estimate of the Ohlson model over one to two years, based on the December 2025 figures.

Earnings quality

Earnings quality is yellow, with neutral readings on free cash flow conversion and dilution. Free cash flow conversion is 68.3% on a trailing basis and 65.6% over five years. The accrual ratio is -5.7%, which points to cash earnings running ahead of reported profit. Stock-based compensation is 0.7% of revenue, leaving free cash flow after it at 582.7 million USD. The share count has grown at 0.54% a year over five years, so there have been no net buybacks. The Piotroski score is 6 of 8 evaluable points, and the Beneish reading is neutral; its M-score value is not available. The company beat earnings estimates in seven of the last eight quarters, with an average surprise of 1.7%. Analysts raised current-year estimates by 6.8% over 90 days with no cuts in the last 30 days, and next-year estimates by 33.2% over 90 days.

Profitability

Profitability is green. The gross margin is 55.3%, in line with its ten-year median of 55.3%. The operating margin is 29.5% against a median of 20.6%, and the net margin is 23.9% against a median of 19.8%. Operating margin stability is 22.8%. The five-year median ROIC is 42.1%, against a WACC of 13.5%, and the trailing ROIC minus WACC gap is assessed as good. The DuPont split shows a net margin of 22.1%, asset turnover of 0.67 and an equity multiplier of 1.19. Return on equity of 23.9% therefore comes mainly from margins and not from leverage.

Growth

Growth is green. Revenue has compounded at 15.9% over three years, 27.0% over five years and 23.7% over ten years. Earnings per share compounded at 12.1% over three years, 29.5% over five years and 30.9% over ten years. Free cash flow per share compounded at 52.6% over three years, 25.0% over five years and 26.5% over ten years. Revenue grew in all ten of the last ten years. Consensus expects next-year earnings per share growth of 58.5%, which is a steep step-up from the three-year rate.

Valuation

Valuation is red. Today's P/E is 75.9 against a ten-year median of 74.2, a premium of 2.3%. The P/FCF of 111.1 is a 64.7% premium to its median of 67.4, the P/S of 18.1 is a 40.2% premium to its median of 12.9, and the P/B of 18.1 is a 53.2% premium to its median of 11.8. The FCF yield is 0.9% and the earnings yield is 1.3%. The DCF gives 268.70 USD per share, using a 13.5% discount rate, 20% growth over the first stage and 2.5% terminal growth. The fair value from historical multiples is 947.94 USD. The fair value band runs from 486.66 to 729.99 USD with a midpoint of 608.32 USD, and the margin of safety is -56.2% at 1388.05 USD. The fair value is an order-of-magnitude figure built on fixed assumptions, not a price target. Reverse DCF implied growth is 40.3%, against five-year revenue growth of 27.0% and five-year free cash flow per share growth of 25.0%. The dividend yield is 0.52%, with a payout of 57.9% of free cash flow.

Risks

The weakest numbers would hurt the company in specific ways. A P/FCF of 111.1 and an FCF yield of 0.9% mean that any slowdown in free cash flow growth would pressure the share price directly. A DCF of 268.70 USD, far below the current price, shows how much future growth the market already prices in. Five-year share count growth of 0.54% means shareholders are slightly diluted. The company's debt, interest expense and the Beneish M-score value are not available, so the leverage and manipulation-risk picture is incomplete. The cost of debt is assumed, not reported. The analysis has no debt maturity schedule and no revenue split by segment or end market, and the fair value rests on fixed assumptions rather than a forecast.