Stock Analysis on Net
Stock Analysis on Net

Super Micro Computer Inc. (NASDAQ:SMCI)

Present Value of Free Cash Flow to the Firm (FCFF)

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 the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

Super Micro Computer Inc., free cash flow to the firm (FCFF) forecast

US$ in thousands, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 15.73%
01 FCFF0 634,072
1 FCFF1 689,101 = 634,072 × (1 + 8.68%) 595,416
2 FCFF2 751,721 = 689,101 × (1 + 9.09%) 561,219
3 FCFF3 823,105 = 751,721 × (1 + 9.50%) 530,969
4 FCFF4 904,631 = 823,105 × (1 + 9.90%) 504,224
5 FCFF5 997,930 = 904,631 × (1 + 10.31%) 480,607
5 Terminal value (TV5) 20,307,888 = 997,930 × (1 + 10.31%) ÷ (15.73% – 10.31%) 9,780,345
Intrinsic value of Super Micro Computer Inc. capital 12,452,779
Less: Short-term and long-term debt (fair value) 290,302
Intrinsic value of Super Micro Computer Inc. common stock 12,162,477
 
Intrinsic value of Super Micro Computer Inc. common stock (per share) $20.77
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.

Weighted Average Cost of Capital (WACC)

Super Micro Computer Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 12,613,076 0.98 16.10%
Short-term and long-term debt (fair value) 290,302 0.02 0.00% = 0.00% × (1 – 11.24%)

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

1 US$ in thousands

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 585,565,270 × $21.54
= $12,613,075,915.80

   Short-term and long-term debt (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (14.70% + 15.70% + 5.80% + 3.40% + 16.60% + 43.60%) ÷ 6
= 11.24%

WACC = 15.73%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Super Micro Computer Inc., PRAT model

Microsoft Excel
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)
Interest expense 10,491 6,413 2,485 2,236 6,690 5,726
Net income 639,998 285,163 111,865 84,308 71,918 46,165
 
Effective income tax rate (EITR)1 14.70% 15.70% 5.80% 3.40% 16.60% 43.60%
 
Interest expense, after tax2 8,949 5,406 2,341 2,160 5,579 3,229
Interest expense (after tax) and dividends 8,949 5,406 2,341 2,160 5,579 3,229
 
EBIT(1 – EITR)3 648,947 290,569 114,206 86,468 77,497 49,394
 
Short-term debt and current portion of long-term debt 170,123 449,146 63,490 23,704 23,647 116,181
Long-term debt, net of current portion 120,179 147,618 34,700 5,697 — —
Total Super Micro Computer, Inc. stockholders’ equity 1,972,005 1,425,575 1,096,225 1,065,540 941,015 843,495
Total capital 2,262,307 2,022,339 1,194,415 1,094,941 964,662 959,676
Financial Ratios
Retention rate (RR)4 0.99 0.98 0.98 0.98 0.93 0.93
Return on invested capital (ROIC)5 28.69% 14.37% 9.56% 7.90% 8.03% 5.15%
Averages
RR 0.96
ROIC 9.00%
 
FCFF growth rate (g)6 8.68%

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).

1 See details »

2023 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 10,491 × (1 – 14.70%)
= 8,949

3 EBIT(1 – EITR) = Net income + Interest expense, after tax
= 639,998 + 8,949
= 648,947

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [648,947 – 8,949] ÷ 648,947
= 0.99

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 648,947 ÷ 2,262,307
= 28.69%

6 g = RR × ROIC
= 0.96 × 9.00%
= 8.68%

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

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (12,903,378 × 15.73% – 634,072) ÷ (12,903,378 + 634,072)
= 10.31%

where:

Total capital, fair value0 = current fair value of Super Micro Computer Inc. debt and equity (US$ in thousands)
FCFF0 = the last year Super Micro Computer Inc. free cash flow to the firm (US$ in thousands)
WACC = weighted average cost of Super Micro Computer Inc. capital

FCFF growth rate (g) forecast

Super Micro Computer Inc., H-model

Microsoft Excel
Year Value gt
1 g1 8.68%
2 g2 9.09%
3 g3 9.50%
4 g4 9.90%
5 and thereafter g5 10.31%

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)
= 8.68% + (10.31% – 8.68%) × (2 – 1) ÷ (5 – 1)
= 9.09%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 8.68% + (10.31% – 8.68%) × (3 – 1) ÷ (5 – 1)
= 9.50%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 8.68% + (10.31% – 8.68%) × (4 – 1) ÷ (5 – 1)
= 9.90%