Intrinsic value of Super Micro Computer - SMCI

Previous Close

$15.65

  Intrinsic Value

$18.72

stock screener

  Rating & Target

hold

+20%

Previous close

$15.65

 
Intrinsic value

$18.72

 
Up/down potential

+20%

 
Rating

hold

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 0001), $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 0.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  18.50
  17.15
  15.94
  14.84
  13.86
  12.97
  12.17
  11.46
  10.81
  10.23
  9.71
  9.24
  8.81
  8.43
  8.09
  7.78
  7.50
  7.25
  7.03
  6.82
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
  5.87
  5.79
  5.71
  5.64
Revenue, $m
  2,625
  3,076
  3,566
  4,095
  4,663
  5,267
  5,909
  6,586
  7,298
  8,044
  8,825
  9,640
  10,490
  11,374
  12,294
  13,250
  14,244
  15,277
  16,351
  17,466
  18,626
  19,833
  21,088
  22,395
  23,756
  25,174
  26,652
  28,194
  29,803
  31,483
Variable operating expenses, $m
  2,431
  2,848
  3,302
  3,792
  4,317
  4,878
  5,471
  6,098
  6,758
  7,449
  8,172
  8,927
  9,713
  10,532
  11,384
  12,270
  13,190
  14,147
  15,141
  16,174
  17,248
  18,365
  19,528
  20,738
  21,998
  23,311
  24,680
  26,108
  27,598
  29,153
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
  2,431
  2,848
  3,302
  3,792
  4,317
  4,878
  5,471
  6,098
  6,758
  7,449
  8,172
  8,927
  9,713
  10,532
  11,384
  12,270
  13,190
  14,147
  15,141
  16,174
  17,248
  18,365
  19,528
  20,738
  21,998
  23,311
  24,680
  26,108
  27,598
  29,153
Operating income, $m
  194
  228
  264
  303
  345
  390
  437
  487
  540
  595
  653
  713
  776
  842
  910
  981
  1,054
  1,131
  1,210
  1,293
  1,378
  1,468
  1,561
  1,657
  1,758
  1,863
  1,972
  2,086
  2,205
  2,330
EBITDA, $m
  210
  246
  285
  328
  373
  421
  473
  527
  584
  643
  706
  771
  839
  910
  983
  1,060
  1,139
  1,222
  1,308
  1,397
  1,490
  1,586
  1,687
  1,791
  1,900
  2,014
  2,132
  2,255
  2,384
  2,518
Interest expense (income), $m
  2
  5
  9
  14
  20
  25
  32
  38
  45
  52
  60
  68
  77
  85
  95
  104
  114
  124
  135
  146
  158
  170
  183
  196
  209
  223
  238
  254
  270
  286
  304
Earnings before tax, $m
  189
  218
  250
  283
  320
  358
  399
  442
  488
  535
  585
  637
  691
  747
  806
  866
  930
  995
  1,064
  1,135
  1,208
  1,285
  1,365
  1,448
  1,535
  1,625
  1,719
  1,817
  1,919
  2,026
Tax expense, $m
  51
  59
  67
  77
  86
  97
  108
  119
  132
  145
  158
  172
  187
  202
  218
  234
  251
  269
  287
  306
  326
  347
  369
  391
  414
  439
  464
  491
  518
  547
Net income, $m
  138
  159
  182
  207
  233
  262
  291
  323
  356
  391
  427
  465
  504
  545
  588
  632
  679
  727
  776
  828
  882
  938
  996
  1,057
  1,120
  1,186
  1,255
  1,326
  1,401
  1,479

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
  1,381
  1,618
  1,876
  2,154
  2,453
  2,771
  3,108
  3,464
  3,839
  4,232
  4,642
  5,071
  5,518
  5,983
  6,467
  6,970
  7,493
  8,036
  8,601
  9,188
  9,798
  10,433
  11,093
  11,781
  12,497
  13,242
  14,020
  14,831
  15,678
  16,561
Adjusted assets (=assets-cash), $m
  1,381
  1,618
  1,876
  2,154
  2,453
  2,771
  3,108
  3,464
  3,839
  4,232
  4,642
  5,071
  5,518
  5,983
  6,467
  6,970
  7,493
  8,036
  8,601
  9,188
  9,798
  10,433
  11,093
  11,781
  12,497
  13,242
  14,020
  14,831
  15,678
  16,561
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
  207
  243
  282
  324
  368
  416
  467
  520
  577
  635
  697
  762
  829
  899
  971
  1,047
  1,125
  1,207
  1,292
  1,380
  1,471
  1,567
  1,666
  1,769
  1,877
  1,989
  2,106
  2,227
  2,354
  2,487
Working capital, $m
  530
  621
  720
  827
  942
  1,064
  1,194
  1,330
  1,474
  1,625
  1,783
  1,947
  2,119
  2,298
  2,483
  2,677
  2,877
  3,086
  3,303
  3,528
  3,763
  4,006
  4,260
  4,524
  4,799
  5,085
  5,384
  5,695
  6,020
  6,359
Total debt, $m
  175
  266
  364
  470
  584
  705
  833
  969
  1,112
  1,261
  1,418
  1,581
  1,752
  1,929
  2,113
  2,305
  2,504
  2,711
  2,926
  3,150
  3,382
  3,624
  3,876
  4,138
  4,410
  4,695
  4,991
  5,300
  5,622
  5,959
Total liabilities, $m
  526
  616
  715
  821
  934
  1,056
  1,184
  1,320
  1,463
  1,612
  1,769
  1,932
  2,102
  2,280
  2,464
  2,656
  2,855
  3,062
  3,277
  3,501
  3,733
  3,975
  4,227
  4,488
  4,761
  5,045
  5,342
  5,651
  5,973
  6,310
Total equity, $m
  855
  1,002
  1,161
  1,333
  1,518
  1,715
  1,924
  2,144
  2,376
  2,619
  2,874
  3,139
  3,416
  3,704
  4,003
  4,315
  4,638
  4,975
  5,324
  5,687
  6,065
  6,458
  6,867
  7,292
  7,735
  8,197
  8,678
  9,180
  9,704
  10,251
Total liabilities and equity, $m
  1,381
  1,618
  1,876
  2,154
  2,452
  2,771
  3,108
  3,464
  3,839
  4,231
  4,643
  5,071
  5,518
  5,984
  6,467
  6,971
  7,493
  8,037
  8,601
  9,188
  9,798
  10,433
  11,094
  11,780
  12,496
  13,242
  14,020
  14,831
  15,677
  16,561
Debt-to-equity ratio
  0.210
  0.270
  0.310
  0.350
  0.380
  0.410
  0.430
  0.450
  0.470
  0.480
  0.490
  0.500
  0.510
  0.520
  0.530
  0.530
  0.540
  0.540
  0.550
  0.550
  0.560
  0.560
  0.560
  0.570
  0.570
  0.570
  0.580
  0.580
  0.580
  0.580
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
  138
  159
  182
  207
  233
  262
  291
  323
  356
  391
  427
  465
  504
  545
  588
  632
  679
  727
  776
  828
  882
  938
  996
  1,057
  1,120
  1,186
  1,255
  1,326
  1,401
  1,479
Depreciation, amort., depletion, $m
  16
  18
  21
  25
  28
  32
  35
  39
  44
  48
  53
  58
  63
  68
  74
  79
  85
  91
  98
  105
  111
  119
  126
  134
  142
  151
  160
  169
  178
  188
Funds from operations, $m
  154
  178
  203
  231
  261
  293
  327
  362
  400
  439
  480
  523
  567
  613
  662
  712
  764
  818
  874
  933
  994
  1,057
  1,123
  1,191
  1,262
  1,337
  1,414
  1,495
  1,579
  1,667
Change in working capital, $m
  83
  91
  99
  107
  115
  122
  130
  137
  144
  151
  158
  165
  172
  179
  186
  193
  201
  209
  217
  225
  234
  244
  254
  264
  275
  286
  299
  311
  325
  339
Cash from operations, $m
  71
  87
  104
  124
  147
  171
  197
  226
  256
  288
  322
  358
  395
  435
  476
  519
  563
  609
  657
  707
  759
  813
  869
  927
  987
  1,050
  1,116
  1,184
  1,254
  1,328
Maintenance CAPEX, $m
  -13
  -16
  -18
  -21
  -25
  -28
  -32
  -35
  -39
  -44
  -48
  -53
  -58
  -63
  -68
  -74
  -79
  -85
  -91
  -98
  -105
  -111
  -119
  -126
  -134
  -142
  -151
  -160
  -169
  -178
New CAPEX, $m
  -32
  -36
  -39
  -42
  -45
  -48
  -51
  -53
  -56
  -59
  -62
  -64
  -67
  -70
  -73
  -76
  -79
  -82
  -85
  -88
  -92
  -95
  -99
  -103
  -108
  -112
  -117
  -122
  -127
  -133
Cash from investing activities, $m
  -45
  -52
  -57
  -63
  -70
  -76
  -83
  -88
  -95
  -103
  -110
  -117
  -125
  -133
  -141
  -150
  -158
  -167
  -176
  -186
  -197
  -206
  -218
  -229
  -242
  -254
  -268
  -282
  -296
  -311
Free cash flow, $m
  26
  35
  47
  61
  77
  95
  115
  137
  160
  185
  212
  241
  271
  302
  335
  369
  405
  443
  481
  521
  563
  606
  651
  698
  746
  796
  848
  902
  959
  1,017
Issuance/(repayment) of debt, $m
  82
  90
  98
  106
  114
  121
  129
  136
  143
  150
  156
  163
  170
  177
  184
  192
  199
  207
  215
  224
  232
  242
  252
  262
  273
  284
  296
  309
  322
  337
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  
  82
  90
  98
  106
  114
  121
  129
  136
  143
  150
  156
  163
  170
  177
  184
  192
  199
  207
  215
  224
  232
  242
  252
  262
  273
  284
  296
  309
  322
  337
Total cash flow (excl. dividends), $m
  108
  126
  146
  167
  191
  216
  244
  272
  303
  335
  369
  404
  441
  479
  519
  561
  604
  650
  696
  745
  796
  848
  903
  960
  1,019
  1,080
  1,144
  1,211
  1,281
  1,354
Retained Cash Flow (-), $m
  -134
  -147
  -160
  -172
  -185
  -197
  -209
  -220
  -232
  -243
  -254
  -265
  -277
  -288
  -300
  -311
  -324
  -336
  -350
  -363
  -378
  -393
  -409
  -425
  -443
  -462
  -481
  -502
  -524
  -547
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
  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 available for distribution, $m
  -26
  -21
  -14
  -5
  6
  19
  35
  52
  71
  92
  114
  139
  164
  191
  220
  250
  281
  313
  347
  382
  418
  455
  494
  534
  576
  619
  663
  709
  757
  807
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
  -25
  -19
  -12
  -4
  5
  14
  23
  32
  41
  48
  54
  59
  62
  64
  65
  63
  61
  58
  53
  48
  43
  38
  32
  27
  22
  18
  14
  11
  8
  6
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 11
Price to Sales 0.3
Price to Book 1
Price to Tangible Book
Price to Cash Flow -7.9
Price to Free Cash Flow -6.1
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 $2215.573 million for the last fiscal year's total revenue generated by Super Micro Computer. The default revenue input number comes from 0001 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 18.5% 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%.

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 13.2 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 20.2%. 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 - $721.195 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 49.475 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 $0.8 billion.

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