2 Reasons to Watch MTSI and 1 to Stay Cautious

June 02, 2025 at 00:00 AM EDT

MTSI Cover Image

Although the S&P 500 is down 2.4% over the past six months, MACOM’s stock price has fallen further to $121.62, losing shareholders 11.2% of their capital. This may have investors wondering how to approach the situation.

Following the drawdown, is now the time to buy MTSI? Find out in our full research report, it’s free.

Why Does MACOM Spark Debate?

Founded in the 1950s as Microwave Associates, a communications supplier to the US Army Signal Corp, today MACOM Technology Solutions (NASDAQ: MTSI) is a provider of analog chips used in optical, wireless, and satellite networks.

Two Positive Attributes:

1. Skyrocketing Revenue Shows Strong Momentum

A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, MACOM’s 12.6% annualized revenue growth over the last five years was impressive. Its growth surpassed the average semiconductor company and shows its offerings resonate with customers. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions. MACOM Quarterly Revenue

2. Outstanding Long-Term EPS Growth

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

MACOM’s full-year EPS flipped from negative to positive over the last five years. This is a good sign and shows it’s at an inflection point.

One Reason to be Careful:

Previous Growth Initiatives Haven’t Impressed

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although MACOM has shown solid business quality lately, it historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 10.6%, somewhat low compared to the best semiconductor companies that consistently pump out 35%+.

MACOM Trailing 12-Month Return On Invested Capital

Final Judgment

MACOM’s merits more than compensate for its flaws. After the recent drawdown, the stock trades at 32.4× forward P/E (or $121.62 per share). Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.

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