Super Micro Computer Inc (SMCI)

Conclusion

Super Micro Computer develops and sells server and storage systems, including liquid and air-cooled AI servers, for enterprise data centers. At a price of 28.60 USD on 2026-11-09, the market capitalisation is 18.79 billion USD.

The verdict is undervalued. Today's P/E of 5.1 compares with a ten-year median of 16.7, and EV/EBITDA of 4.2 compares with 10.7. Price-to-sales is 0.35 against a median of 0.59, and price-to-book is 1.17 against 1.72. The fair value band runs from 50.19 to 75.28 USD with a midpoint of 62.73 USD, a margin of safety of 119.4% at the current price. The fair value from historical multiples is 62.73 USD. The DCF per-share value and the reverse DCF are not available. Revenue grew at a compound rate of 76.3% over three years and 61.5% over five years.

What holds the case up is a return on invested capital of 21.9% against a WACC of 12.1%, a gap given as 9.8 percentage points, and net debt of 0.36 times EBITDA. What would break it is free cash flow conversion of -1.78 on a trailing basis, a five-year share count compound growth of 6.6%, and a Piotroski score of 2 out of 9. The Beneish reading also points to possible earnings manipulation.

Financial health

Financial strength is green, held up by a current ratio of 3.02, a quick ratio of 1.50, net debt to EBITDA of 0.36, and interest coverage of 19.3 times. Debt to equity is 0.54. The Altman Z-score is 3.57, which sits in the safe zone. The Altman model was designed for manufacturers, and this company builds hardware, so the reading applies reasonably well. Insolvency risk is low, about 0.3% by the estimate of the Ohlson model over one to two years, based on figures as of 2026-06-30. The company has no dividend, and the balance sheet shows no stress on these measures.

Earnings quality

Earnings quality is red, pulled down by weak cash conversion and dilution. Free cash flow conversion is -1.78 on a trailing basis and -1.46 over five years, and free cash flow after stock-based compensation is -6.83 billion USD. The accrual ratio is 0.41. Stock-based compensation is 0.6% of revenue, and the share count has grown at a compound rate of 6.6% over five years, so there are no net buybacks. The Piotroski score is 2 out of 9. The Beneish M-score is 0.14, which falls in the range the model associates with likely manipulation. On the positive side, the company beat estimates in 6 of the last 8 quarters, with an average surprise of 39.9%. Four analysts raised current-year estimates in the last 30 days, and none lowered them.

Profitability

Profitability is green. The gross margin is 11.7% against a ten-year median of 14.1%, the operating margin is 8.6% against 6.1%, and the net margin is 6.8% against 4.0%. Return on invested capital is 21.9% against a WACC of 12.1%, a gap of 9.8 percentage points. The five-year median return on invested capital is 17.0%. The DuPont split shows a net margin of 5.7%, an asset turnover of 1.30, and an equity multiplier of 2.07, which together give a return on equity of 22.8%. Leverage contributes to that return, but the operating economics also show a positive spread over the cost of capital.

Growth

Growth is green. Revenue compound growth is 76.3% over three years, 61.5% over five years, and 33.2% over ten years. Earnings per share compound at 38.3% over three years, 70.6% over five years, and 36.8% over ten years. Revenue grew in 9 of the 10 comparable years. Analysts expect earnings per share to grow 18% in the next fiscal year, and next-year estimates have risen 50.9% over the last 90 days. These figures reflect a long run of rapid expansion, and the ten-year growth rate is well below the five- and three-year rates.

Valuation

Valuation is green, with the verdict undervalued. The P/E is 5.1 against a ten-year median of 16.7, a premium of -69.1%. EV/EBITDA is 4.2 against 10.7, a premium of -60.9%. Price-to-sales is 0.35 against 0.59, a premium of -40.7%, and price-to-book is 1.17 against 1.72, a premium of -32.1%. The free cash flow yield is -34.6%. The DCF per-share value is not available. The model uses a discount rate of 15.8% and a terminal growth rate of 2.5%, but the trailing free cash flow it starts from is negative. The fair value band is 50.19 to 75.28 USD, and the fair value from historical multiples is 62.73 USD. The reverse DCF is not available, so the growth the price implies cannot be compared with the growth delivered. The company pays no dividend.

Risks

The weakest number is free cash flow conversion. Negative free cash flow means the operating profit is not turning into cash, so the reported earnings and the valuation rest on accounting figures that the cash flows do not yet confirm. The share count growth of 6.6% a year dilutes existing holders and reduces the value per share even when earnings grow. A Piotroski score of 2 out of 9 and a Beneish reading in the manipulation range call for a closer look at reporting quality. Because the DCF starts from negative free cash flow, the DCF per-share value and the reverse DCF are not available. Only the fair value band and the fair value from historical multiples can be reported.

This analysis has limits. It has no debt maturity schedule, so refinancing risk cannot be judged. It has no revenue by segment, so the exposure to AI server demand cannot be separated from the rest of the business.