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Today: June 21, 2024
January 29, 2024
1 min read

Is Microchip Technology a risky investment? Be cautious, potential risks

TLDR:

  • Microchip Technology Incorporated (NASDAQ:MCHP) carries debt on its balance sheet, but the overall risk is relatively low.
  • The company’s net debt stands at approximately US$5.82 billion, offset by cash and receivables.
  • Microchip Technology has a low net debt to EBITDA ratio of 1.3 and its EBIT easily covers its interest expense.
  • Over the past year, the company saw a 37% growth in EBIT, which helps in handling its debt.
  • Microchip Technology has positive free cash flow, which is essential for managing debt.

Microchip Technology Incorporated (NASDAQ:MCHP) is displaying a low level of risk when it comes to its debt, according to an analysis by Simply Wall St. The company has US$5.82 billion in net debt, which is offset by its cash and receivables. It has a low net debt to EBITDA ratio of 1.3 and its EBIT covers its interest expense. Microchip Technology also saw a 37% growth in EBIT over the past year, meaning it has the ability to handle its debt. Additionally, the company has generated positive free cash flow, which is crucial for managing its debt. While debt is always something to monitor, Microchip Technology seems to have a modest debt load that does not pose significant risks. However, investors should always consider the balance sheet and future profitability of the company when assessing its overall risk.

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