Stock Analysis on Net
Stock Analysis on Net

Super Micro Computer Inc. (NASDAQ:SMCI)

Present Value of Free Cash Flow to Equity (FCFE)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.

Intrinsic Stock Value (Valuation Summary)

Super Micro Computer Inc., free cash flow to equity (FCFE) forecast

US$ in thousands, except per share data

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Year Value FCFEt or Terminal value (TVt) Calculation Present value at 16.10%
01 FCFE0 326,256
1 FCFE1 372,073 = 326,256 × (1 + 14.04%) 320,486
2 FCFE2 423,511 = 372,073 × (1 + 13.82%) 314,215
3 FCFE3 481,134 = 423,511 × (1 + 13.61%) 307,475
4 FCFE4 545,547 = 481,134 × (1 + 13.39%) 300,301
5 FCFE5 617,391 = 545,547 × (1 + 13.17%) 292,729
5 Terminal value (TV5) 23,868,364 = 617,391 × (1 + 13.17%) ÷ (16.10% – 13.17%) 11,316,914
Intrinsic value of Super Micro Computer Inc. common stock 12,852,119
 
Intrinsic value of Super Micro Computer Inc. common stock (per share) $21.95
Current share price $21.54

Based on: 10-K (reporting date: 2023-06-30).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.65%
Expected rate of return on market portfolio2 E(RM) 13.79%
Systematic risk of Super Micro Computer Inc. common stock βSMCI 1.25
 
Required rate of return on Super Micro Computer Inc. common stock3 rSMCI 16.10%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rSMCI = RF + βSMCI [E(RM) – RF]
= 4.65% + 1.25 [13.79% – 4.65%]
= 16.10%

FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Super Micro Computer Inc., PRAT model

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Average Jun 30, 2023 Jun 30, 2022 Jun 30, 2021 Jun 30, 2020 Jun 30, 2019 Jun 30, 2018
Selected Financial Data (US$ in thousands)
Net income 639,998 285,163 111,865 84,308 71,918 46,165
Net sales 7,123,482 5,196,099 3,557,422 3,339,281 3,500,360 3,360,492
Total assets 3,674,729 3,205,077 2,241,964 1,918,646 1,682,594 1,769,505
Total Super Micro Computer, Inc. stockholders’ equity 1,972,005 1,425,575 1,096,225 1,065,540 941,015 843,495
Financial Ratios
Retention rate1 1.00 1.00 1.00 1.00 1.00 1.00
Profit margin2 8.98% 5.49% 3.14% 2.52% 2.05% 1.37%
Asset turnover3 1.94 1.62 1.59 1.74 2.08 1.90
Financial leverage4 1.86 2.25 2.05 1.80 1.79 2.10
Averages
Retention rate 1.00
Profit margin 3.93%
Asset turnover 1.81
Financial leverage 1.97
 
FCFE growth rate (g)5 14.04%

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

2023 Calculations

1 Company does not pay dividends

2 Profit margin = 100 × Net income ÷ Net sales
= 100 × 639,998 ÷ 7,123,482
= 8.98%

3 Asset turnover = Net sales ÷ Total assets
= 7,123,482 ÷ 3,674,729
= 1.94

4 Financial leverage = Total assets ÷ Total Super Micro Computer, Inc. stockholders’ equity
= 3,674,729 ÷ 1,972,005
= 1.86

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 1.00 × 3.93% × 1.81 × 1.97
= 14.04%

FCFE growth rate (g) implied by single-stage model

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (12,613,076 × 16.10% – 326,256) ÷ (12,613,076 + 326,256)
= 13.17%

where:
Equity market value0 = current market value of Super Micro Computer Inc. common stock (US$ in thousands)
FCFE0 = the last year Super Micro Computer Inc. free cash flow to equity (US$ in thousands)
r = required rate of return on Super Micro Computer Inc. common stock

FCFE growth rate (g) forecast

Super Micro Computer Inc., H-model

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Year Value gt
1 g1 14.04%
2 g2 13.82%
3 g3 13.61%
4 g4 13.39%
5 and thereafter g5 13.17%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 14.04% + (13.17% – 14.04%) × (2 – 1) ÷ (5 – 1)
= 13.82%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 14.04% + (13.17% – 14.04%) × (3 – 1) ÷ (5 – 1)
= 13.61%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 14.04% + (13.17% – 14.04%) × (4 – 1) ÷ (5 – 1)
= 13.39%