MPWR

MPWR is a genuinely high-quality business. FY2025 revenue grew 26.4% to $2.79B, continuing an unbroken climb ($1.21B→$1.79B→$1.82B→$2.21B→$2.79B since 2021), and operating income actually rose 35.1% to $729M with a 26.1% operating margin and 55.2% gross margin — so the franchise is strengthening, not deteriorating. The headline 'net income -61%, EPS -60.6%' is an optical illusion: FY2024 net income of $1.59B implied a ~72% net margin, far above the operating line, meaning it was inflated by a large one-time below-the-line item (consistent with the MD&A's emphasis on 'income taxes valuation allowances'). Measured by operating income and cash, 2025 was an up year. The balance sheet is pristine — liabilities/equity of just 0.21x, $1.10B cash (+58.9%), $838M operating cash flow, and a fabless model that keeps capex light ($172M) — funding a growing dividend ($285M paid, +18.4%) and 20.2% ROE.

The problem is the price, not the company. At $1563.70 the stock trades at 121.6x trailing EPS and 27.5x sales — a valuation that discounts many years of flawless 20%+ growth and margin expansion. Even crediting the normalized earnings power (operating income $729M), the $76.8B market cap is roughly 105x operating income. After a +7.97% single-day jump, the entry point is unforgiving: any growth wobble, margin slip, or multiple compression in this cyclical industry could mean a sharp drawdown even if the business performs.