Monolithic Power Systems, Inc.MPWRNASDAQ

Overview Intelligence Charts News Fundamentals

DCF Valuation

DCF Valuation Summary

Strong Sell

Fair Value: $630.57 per share(market-calibrated)

-41.3%

Upside to Fair Value

Current

$1,074.37

Pure Model

$482.64

Fair Value

$630.57

Bull Case

$697.14

Bear Case

$322.66

Market Reality Check

Model Terminal Growth

3.75%

Market-Implied Growth

Unreachable

Calibrated Growth

75/25 blend

Market price implies assumptions beyond model range. Fair value blends 75% model / 25% market price.

What's Driving This Ratingfor MPWR

✓

CapEx already efficient

CapEx at 3.80% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

✓

Premium margins already priced in

EBIT margin of 25.89% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.

↑

Strong near-term revenue growth

Analyst consensus projects 21.05% revenue growth in Year 1, fading to 16.51% by Year 5 and 3.75% by Year 10. Revenue reaches $9.7B by Year 10 (vs $2.8B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $300.48/share (13.9x terminal FCF) while exit multiple gives $664.80/share (44.1x terminal FCF). The 28x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.75% growth is more conservative. The base case averages both methods.

⚠

Market price exceeds model's maximum

Even with the most optimistic terminal growth the model allows, it can't reach $1,074.37. The market is pricing in factors beyond the DCF framework — possibly optionality, brand premium, or expectations of margin/growth inflection not yet in analyst estimates.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 63.50% indicates efficient cash generation. FCF reaches $1.7B by Year 10 (17.33% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.49

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)11.21%

Cost of Debt

Pre-tax Cost of Debt0.00%

Tax Rate19.61%

After-tax Cost of Debt0.00%

Equity Weight (E/V)99.95%

Debt Weight (D/V)0.05%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (99.95% × 11.21%) + (0.05% × 0.00%)

= 11.20%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$3.4B	$4.7B	$6.3B	$8.1B	$9.7B
EBIT	$874M	$1.2B	$1.6B	$2.1B	$2.5B
Tax	$172M	$238M	$322M	$409M	$491M
NOPAT	$703M	$973M	$1.3B	$1.7B	$2.0B
+ Depreciation	$47M	$65M	$89M	$113M	$135M
- Capex	$128M	$178M	$241M	$306M	$368M
- Δ NWC	$176M	$216M	$270M	$248M	$105M
Free Cash Flow	$446M	$645M	$899M	$1.2B	$1.7B
Discount Factor	0.899	0.727	0.588	0.476	0.346
Present Value	$401M	$469M	$529M	$588M	$580M

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$1.7B

Terminal Growth Rate3.75%

WACC11.20%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$23.4B

PV of Terminal Value$8.1B

Exit Multiple Method

Year 10 EBITDA$2.6B

Exit Multiple (EV/EBITDA)28.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$73.9B

PV of Terminal Value$25.6B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$5.3B

PV of Terminal Value$8.1B

Enterprise Value$13.4B

(-) Net Debt-$1.1B

Equity Value$14.4B

Shares Outstanding48M

Price per Share$300.48

Exit Multiple Method

PV of Projected FCFs$5.3B

PV of Terminal Value$25.6B

Enterprise Value$30.9B

(-) Net Debt-$1.1B

Equity Value$31.9B

Shares Outstanding48M

Price per Share$664.80

Pure Model Fair Value

$482.64

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.75%	3.25%	3.75%	4.25%	4.75%
9.20%	$579.32	$589.62	$601.81	$616.46	$634.41
10.20%	$520.87	$527.90	$536.02	$545.51	$556.74
11.20%	$471.97	$476.97	$482.64	$489.12	$496.61
12.20%	$430.22	$433.88	$437.97	$442.58	$447.81
13.20%	$394.01	$396.76	$399.81	$403.19	$406.97

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$322.66

-70.0% vs current

• -25% vs analyst consensus
• Terminal growth: 3.3%
• Beta: 1.86

Base Case

$482.64

-55.1% vs current

• Analyst consensus
• Terminal growth: 3.8%
• Beta: 1.49

Bull Case

$697.14

-35.1% vs current

• +25% vs analyst consensus
• Terminal growth: 4.3%
• Beta: 1.27

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Technology Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth21.05%

Year 3 Revenue Growth18.21%

Year 5 Revenue Growth16.51%

Year 7 Revenue Growth11.41%

Year 10 Revenue Growth3.75%

Terminal Growth Rate3.75%

Margin & Efficiency

Current EBIT Margin25.89%

Terminal EBIT Margin26.11%

Tax Rate19.61%

Historical Capex / Rev3.80%

NWC / Revenue30.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 28x EV/EBITDA (Technology sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

Explore More

S&P 500 Screener

Filter and sort all 500 stocks

Market Movers

Today's biggest gainers and losers

Market Heatmap

Visual sector performance