Intrinsic value of Super Micro Computer - SMCI

Previous Close

$18.85

  Intrinsic Value

$31.98

stock screener

  Rating & Target

str. buy

+70%

Previous close

$18.85

 
Intrinsic value

$31.98

 
Up/down potential

+70%

 
Rating

str. buy

We calculate the intrinsic value of SMCI stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  11.30
  10.67
  10.10
  9.59
  9.13
  8.72
  8.35
  8.01
  7.71
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
Revenue, $m
  2,466
  2,730
  3,005
  3,294
  3,594
  3,908
  4,234
  4,573
  4,926
  5,293
  5,674
  6,069
  6,481
  6,909
  7,354
  7,817
  8,299
  8,801
  9,324
  9,870
  10,439
  11,033
  11,653
  12,301
  12,977
  13,685
  14,425
  15,199
  16,009
  16,857
Variable operating expenses, $m
  2,284
  2,528
  2,783
  3,050
  3,328
  3,619
  3,921
  4,235
  4,562
  4,901
  5,254
  5,620
  6,001
  6,397
  6,810
  7,238
  7,685
  8,150
  8,634
  9,139
  9,666
  10,216
  10,791
  11,390
  12,017
  12,672
  13,358
  14,074
  14,824
  15,610
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  2,284
  2,528
  2,783
  3,050
  3,328
  3,619
  3,921
  4,235
  4,562
  4,901
  5,254
  5,620
  6,001
  6,397
  6,810
  7,238
  7,685
  8,150
  8,634
  9,139
  9,666
  10,216
  10,791
  11,390
  12,017
  12,672
  13,358
  14,074
  14,824
  15,610
Operating income, $m
  183
  202
  222
  244
  266
  289
  313
  338
  365
  392
  420
  449
  480
  511
  544
  578
  614
  651
  690
  730
  772
  816
  862
  910
  960
  1,013
  1,067
  1,125
  1,185
  1,247
EBITDA, $m
  202
  224
  246
  270
  294
  320
  347
  375
  403
  433
  465
  497
  531
  566
  602
  640
  680
  721
  764
  808
  855
  904
  954
  1,007
  1,063
  1,121
  1,181
  1,245
  1,311
  1,381
Interest expense (income), $m
  2
  5
  8
  11
  14
  17
  20
  23
  27
  31
  34
  38
  42
  47
  51
  56
  61
  66
  71
  76
  82
  88
  94
  100
  107
  114
  121
  129
  137
  146
  154
Earnings before tax, $m
  177
  194
  212
  230
  249
  269
  290
  312
  334
  357
  382
  407
  433
  460
  488
  518
  548
  580
  614
  648
  685
  722
  762
  803
  846
  891
  938
  988
  1,039
  1,093
Tax expense, $m
  48
  52
  57
  62
  67
  73
  78
  84
  90
  96
  103
  110
  117
  124
  132
  140
  148
  157
  166
  175
  185
  195
  206
  217
  228
  241
  253
  267
  281
  295
Net income, $m
  130
  142
  155
  168
  182
  197
  212
  227
  244
  261
  279
  297
  316
  336
  357
  378
  400
  424
  448
  473
  500
  527
  556
  586
  618
  651
  685
  721
  759
  798

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,297
  1,436
  1,581
  1,733
  1,891
  2,056
  2,227
  2,406
  2,591
  2,784
  2,985
  3,193
  3,409
  3,634
  3,868
  4,112
  4,366
  4,630
  4,905
  5,192
  5,491
  5,804
  6,130
  6,471
  6,827
  7,199
  7,588
  7,995
  8,421
  8,868
Adjusted assets (=assets-cash), $m
  1,297
  1,436
  1,581
  1,733
  1,891
  2,056
  2,227
  2,406
  2,591
  2,784
  2,985
  3,193
  3,409
  3,634
  3,868
  4,112
  4,366
  4,630
  4,905
  5,192
  5,491
  5,804
  6,130
  6,471
  6,827
  7,199
  7,588
  7,995
  8,421
  8,868
Revenue / Adjusted assets
  1.901
  1.901
  1.901
  1.901
  1.901
  1.901
  1.901
  1.901
  1.901
  1.901
  1.901
  1.901
  1.901
  1.901
  1.901
  1.901
  1.901
  1.901
  1.901
  1.901
  1.901
  1.901
  1.901
  1.901
  1.901
  1.901
  1.901
  1.901
  1.901
  1.901
Average production assets, $m
  195
  216
  237
  260
  284
  309
  334
  361
  389
  418
  448
  479
  512
  546
  581
  618
  656
  695
  737
  780
  825
  872
  921
  972
  1,025
  1,081
  1,140
  1,201
  1,265
  1,332
Working capital, $m
  222
  246
  270
  296
  324
  352
  381
  412
  443
  476
  511
  546
  583
  622
  662
  704
  747
  792
  839
  888
  940
  993
  1,049
  1,107
  1,168
  1,232
  1,298
  1,368
  1,441
  1,517
Total debt, $m
  143
  196
  251
  309
  369
  432
  498
  566
  636
  710
  786
  865
  948
  1,034
  1,123
  1,216
  1,312
  1,413
  1,518
  1,627
  1,741
  1,860
  1,984
  2,114
  2,250
  2,392
  2,540
  2,695
  2,858
  3,028
Total liabilities, $m
  494
  547
  602
  660
  720
  783
  849
  917
  987
  1,061
  1,137
  1,216
  1,299
  1,385
  1,474
  1,567
  1,663
  1,764
  1,869
  1,978
  2,092
  2,211
  2,335
  2,465
  2,601
  2,743
  2,891
  3,046
  3,209
  3,379
Total equity, $m
  803
  889
  979
  1,072
  1,170
  1,272
  1,379
  1,489
  1,604
  1,723
  1,847
  1,976
  2,110
  2,250
  2,394
  2,545
  2,702
  2,866
  3,036
  3,214
  3,399
  3,592
  3,794
  4,005
  4,226
  4,456
  4,697
  4,949
  5,213
  5,489
Total liabilities and equity, $m
  1,297
  1,436
  1,581
  1,732
  1,890
  2,055
  2,228
  2,406
  2,591
  2,784
  2,984
  3,192
  3,409
  3,635
  3,868
  4,112
  4,365
  4,630
  4,905
  5,192
  5,491
  5,803
  6,129
  6,470
  6,827
  7,199
  7,588
  7,995
  8,422
  8,868
Debt-to-equity ratio
  0.180
  0.220
  0.260
  0.290
  0.320
  0.340
  0.360
  0.380
  0.400
  0.410
  0.430
  0.440
  0.450
  0.460
  0.470
  0.480
  0.490
  0.490
  0.500
  0.510
  0.510
  0.520
  0.520
  0.530
  0.530
  0.540
  0.540
  0.540
  0.550
  0.550
Adjusted equity ratio
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  130
  142
  155
  168
  182
  197
  212
  227
  244
  261
  279
  297
  316
  336
  357
  378
  400
  424
  448
  473
  500
  527
  556
  586
  618
  651
  685
  721
  759
  798
Depreciation, amort., depletion, $m
  19
  22
  24
  26
  28
  31
  33
  36
  39
  42
  45
  48
  51
  55
  58
  62
  66
  70
  74
  78
  82
  87
  92
  97
  103
  108
  114
  120
  126
  133
Funds from operations, $m
  149
  163
  178
  194
  210
  227
  245
  264
  283
  303
  323
  345
  367
  390
  415
  440
  466
  493
  522
  551
  582
  615
  648
  683
  720
  759
  799
  841
  885
  931
Change in working capital, $m
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  34
  36
  37
  39
  40
  42
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  73
  76
Cash from operations, $m
  126
  140
  154
  168
  183
  199
  216
  233
  251
  270
  289
  309
  330
  352
  375
  398
  423
  448
  475
  502
  531
  561
  592
  625
  659
  695
  732
  771
  812
  855
Maintenance CAPEX, $m
  -18
  -19
  -22
  -24
  -26
  -28
  -31
  -33
  -36
  -39
  -42
  -45
  -48
  -51
  -55
  -58
  -62
  -66
  -70
  -74
  -78
  -82
  -87
  -92
  -97
  -103
  -108
  -114
  -120
  -126
New CAPEX, $m
  -19
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -64
  -67
Cash from investing activities, $m
  -37
  -40
  -44
  -47
  -50
  -53
  -57
  -60
  -64
  -68
  -72
  -76
  -81
  -85
  -90
  -95
  -100
  -106
  -111
  -117
  -123
  -129
  -136
  -143
  -150
  -159
  -166
  -175
  -184
  -193
Free cash flow, $m
  90
  99
  110
  122
  134
  146
  159
  173
  187
  202
  217
  233
  250
  267
  285
  303
  323
  343
  364
  385
  408
  432
  456
  482
  509
  537
  566
  596
  628
  661
Issuance/(repayment) of debt, $m
  50
  53
  55
  58
  60
  63
  65
  68
  71
  73
  76
  79
  82
  86
  89
  93
  97
  101
  105
  109
  114
  119
  124
  130
  136
  142
  148
  155
  162
  170
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  50
  53
  55
  58
  60
  63
  65
  68
  71
  73
  76
  79
  82
  86
  89
  93
  97
  101
  105
  109
  114
  119
  124
  130
  136
  142
  148
  155
  162
  170
Total cash flow (excl. dividends), $m
  139
  152
  165
  179
  194
  209
  225
  241
  258
  275
  293
  312
  332
  353
  374
  396
  419
  443
  469
  495
  522
  551
  581
  612
  644
  678
  714
  751
  790
  831
Retained Cash Flow (-), $m
  -82
  -86
  -90
  -94
  -98
  -102
  -106
  -110
  -115
  -119
  -124
  -129
  -134
  -139
  -145
  -151
  -157
  -164
  -170
  -178
  -185
  -193
  -202
  -211
  -220
  -230
  -241
  -252
  -264
  -276
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  13
  15
  16
  18
  20
  22
  23
  25
  27
  30
  32
  34
  36
  39
  41
  44
  47
  50
  53
  56
  59
  63
  66
  70
  74
  78
  82
  87
  91
  96
Cash available for distribution, $m
  57
  66
  76
  85
  96
  107
  118
  130
  143
  156
  169
  184
  198
  213
  229
  245
  262
  280
  298
  317
  337
  357
  379
  401
  424
  448
  473
  499
  527
  555
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  55
  61
  66
  70
  74
  78
  80
  81
  82
  82
  80
  78
  75
  72
  67
  62
  57
  52
  46
  40
  35
  30
  25
  20
  16
  13
  10
  8
  6
  4
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Super Micro Computer, Inc. is engaged in developing and providing end-to-end green computing solutions to the cloud computing, data center, enterprise information technology (IT), big data, high performance computing (HPC) and Internet of Things (IoT)/embedded markets. The Company's solutions range from server, storage, blade and workstations to full racks, networking devices, server management software and technology support and services. The Company sells its server systems and server subsystems and accessories through a combination of distributors, including value added resellers and system integrators, and other equipment manufacturers (OEMs). As of June 30, 2016, the Company offered over 4,950 stock keeping units (SKUs), including SKUs for server and storage systems, serverboards, chassis, power supplies and other system accessories. The Company develops and manufactures server solutions based upon a modular and open architecture.

FINANCIAL RATIOS  of  Super Micro Computer (SMCI)

Valuation Ratios
P/E Ratio 13.3
Price to Sales 0.4
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow -9.6
Price to Free Cash Flow -7.3
Growth Rates
Sales Growth Rate 14.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -14.7%
Cap. Spend. - 3 Yr. Gr. Rate 42.1%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 11.5%
Total Debt to Equity 20.1%
Interest Coverage 51
Management Effectiveness
Return On Assets 5.3%
Ret/ On Assets - 3 Yr. Avg. 7.6%
Return On Total Capital 7.8%
Ret/ On T. Cap. - 3 Yr. Avg. 11.3%
Return On Equity 9.1%
Return On Equity - 3 Yr. Avg. 12.9%
Asset Turnover 1.9
Profitability Ratios
Gross Margin 14.2%
Gross Margin - 3 Yr. Avg. 15.1%
EBITDA Margin 4.7%
EBITDA Margin - 3 Yr. Avg. 6%
Operating Margin 4%
Oper. Margin - 3 Yr. Avg. 5.4%
Pre-Tax Margin 4%
Pre-Tax Margin - 3 Yr. Avg. 5.3%
Net Profit Margin 2.7%
Net Profit Margin - 3 Yr. Avg. 3.7%
Effective Tax Rate 31%
Eff/ Tax Rate - 3 Yr. Avg. 30.9%
Payout Ratio 0%

SMCI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SMCI stock intrinsic value calculation we used $2216 million for the last fiscal year's total revenue generated by Super Micro Computer. The default revenue input number comes from 2016 income statement of Super Micro Computer. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our SMCI stock valuation model: a) initial revenue growth rate of 11.3% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for SMCI is calculated based on our internal credit rating of Super Micro Computer, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Super Micro Computer.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of SMCI stock the variable cost ratio is equal to 92.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for SMCI stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Super Micro Computer.

Corporate tax rate of 27% is the nominal tax rate for Super Micro Computer. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the SMCI stock is equal to 0.6%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for SMCI are equal to 7.9%.

Life of production assets of 10 years is the average useful life of capital assets used in Super Micro Computer operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for SMCI is equal to 9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $721 million for Super Micro Computer - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 48 million for Super Micro Computer is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Super Micro Computer at the current share price and the inputted number of shares is $0.9 billion.

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