Hey gang, a colleague asked me to do a quick analysis of Super Micro Computer (SMCI). This stock has attracted attention with explosive growth followed by a significant correction. Here’s my breakdown:
The Numbers Look Impressive
Growth Story: Revenue growth has been insane – from $1B in 2012 to over $21B TTM. The last two years have been particularly explosive. Net profit is also up significantly, with crazy income growth in recent years.
Balance Sheet Strength:
- Total equity steadily increasing, jumping sharply in the past two years (from $1.4B to $6.3B TTM)
- Debt is basically non-existent – net debt/EBITDA is mostly negative or around zero
- Current ratio is solid at over 3.8 this last year
Profitability Metrics:
- Operating margin of 6-10% isn’t outstanding, but it’s pretty good for this sector and has improved over the last two years
- Profit margin stable between 5-9%, which is solid for hardware/server manufacturing
- ROE and ROIC in 2023-24 are close to 30% – huge for this industry
Cash Flow: Free cash flow used to be unstable, but there’s been a massive jump recently (627M in 2023, -2.6B in 2024 – watch out for one-off investments!). TTM is positive again, and long-term cash flow is becoming more stable.
Valuation Looks Reasonable
- P/E: 17.5 (TTM) isn’t excessive for a company growing this fast
- EV/EBITDA: Went up over the past year due to higher expectations, but still within reasonable range (14-18)
- P/B: Under 5, which is decent considering the growth and balance sheet strength
The Big Red Flag
I’ve seen negative news about questionable accounting practices. I haven’t dug into the details yet, but this is concerning enough to warrant serious investigation.
My Take
Just looking at the numbers, SMCI would go on my watchlist and could be a buy at this price. However, I definitely wouldn’t allocate a large portion of my portfolio until I really figure out what’s going on with the accounting issues and any other potential problems.
The fundamentals look strong, but accounting red flags are something I never ignore.
Data source: roic.ai/quote/SMCI
Remember: This is my personal analysis based on available financial data. Always do your own research, especially regarding any accounting or regulatory concerns.
