Super Micro Computer, Inc.SMCINASDAQ
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DCF Valuation
DCF Valuation Summary
Strong Buy
Fair Value: $280.45 per share(market-calibrated)
+803.1%
Upside to Fair Value
Current
$31.05
Pure Model
$296.77
Fair Value
$280.45
Bull Case
$447.80
Bear Case
$188.26
Market Reality Check
Model Terminal Growth
3.75%
Market-Implied Growth
0.50%
Calibrated Growth
2.61%
Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $296.77.
What's Driving This Ratingfor SMCI
✓
CapEx already efficient
CapEx at 0.36% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.
↑
Margin expansion modeled
Current EBIT margin is 6.95% — below the sector mature average of 25.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $15.7B (20.27% margin).
⚠
Analyst growth decelerates sharply
Revenue growth drops from 84.18% in Year 1 to 3.75% by Year 5 (per analyst consensus). This growth deceleration is a key reason the model may undervalue the stock if growth re-accelerates.
↔
Perpetuity and exit methods disagree
Perpetuity growth gives $228.74/share (19.4x terminal FCF) while exit multiple gives $364.80/share (34.4x terminal FCF). The 28x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.75% growth is more conservative. The base case averages both methods.
🎯
Market pricing in lower growth than model
The market implies only 0.50% perpetual growth — 325bps below the model's 3.75%. This suggests the market sees headwinds or risks not in the model.
✓
Strong cash flow conversion
Year 10 FCF/EBITDA conversion of 81.43% indicates efficient cash generation. FCF reaches $12.9B by Year 10 (16.65% FCF margin).
Weighted Average Cost of Capital (WACC)
Cost of Equity (CAPM)
Risk-Free Rate (Rf)4.50%
Beta (β)1.52
Market Risk Premium4.50%
*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)
Cost of Equity (Re)11.35%
Cost of Debt
Pre-tax Cost of Debt0.41%
Tax Rate13.01%
After-tax Cost of Debt0.36%
Equity Weight (E/V)79.41%
Debt Weight (D/V)20.59%
WACC Calculation
WACC = (E/V × Re) + (D/V × Rd × (1-Tc))
WACC = (79.41% × 11.35%) + (20.59% × 0.36%)
= 9.09%
10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)
| Year | Year 1 | Year 3 | Year 5 | Year 7 | Year 10 |
|---|---|---|---|---|---|
| Revenue | $40.5B | $55.7B | $64.4B | $69.3B | $77.4B |
| EBIT | $2.8B | $3.9B | $6.8B | $10.9B | $15.7B |
| Tax | $366M | $503M | $885M | $1.4B | $2.0B |
| NOPAT | $2.4B | $3.4B | $5.9B | $9.5B | $13.7B |
| + Depreciation | $71M | $98M | $113M | $122M | $136M |
| - Capex | $144M | $198M | $230M | $247M | $276M |
| - Δ NWC | $4.1B | $1.7B | $517M | $557M | $622M |
| Free Cash Flow | -$1.7B | $1.6B | $5.3B | $8.8B | $12.9B |
| Discount Factor | 0.917 | 0.770 | 0.647 | 0.544 | 0.419 |
| Present Value | -$1.6B | $1.2B | $3.4B | $4.8B | $5.4B |
FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital
Terminal Value Calculation
Perpetuity Growth Method
Year 10 FCF$12.9B
Terminal Growth Rate3.75%
WACC9.09%
TV = FCF₁₀ × (1+g) / (WACC-g)
Terminal Value$250.5B
PV of Terminal Value$104.9B
Exit Multiple Method
Year 10 EBITDA$15.8B
Exit Multiple (EV/EBITDA)28.0x
TV = EBITDA₁₀ × Exit Multiple
Terminal Value$443.3B
PV of Terminal Value$185.7B
Valuation Summary
Perpetuity Growth Method
PV of Projected FCFs$30.5B
PV of Terminal Value$104.9B
Enterprise Value$135.4B
(-) Net Debt-$391M
Equity Value$135.8B
Shares Outstanding594M
Price per Share$228.74
Exit Multiple Method
PV of Projected FCFs$30.5B
PV of Terminal Value$185.7B
Enterprise Value$216.2B
(-) Net Debt-$391M
Equity Value$216.6B
Shares Outstanding594M
Price per Share$364.80
Pure Model Fair Value
$296.77
Average of perpetuity growth and exit multiple methods (before market calibration)
Sensitivity AnalysisPrice per Share
| WACC ↓ / Growth → | 2.75% | 3.25% | 3.75% | 4.25% | 4.75% |
|---|---|---|---|---|---|
| 7.09% | $377.47 | $395.05 | $417.90 | $448.79 | $492.89 |
| 8.09% | $323.14 | $333.57 | $346.40 | $362.57 | $383.59 |
| 9.09% | $282.11 | $288.82 | $296.77 | $306.37 | $318.18 |
| 10.09% | $249.48 | $254.03 | $259.30 | $265.47 | $272.80 |
| 11.09% | $222.60 | $225.82 | $229.48 | $233.68 | $238.54 |
How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.
Scenario Analysis
Bear Case
$188.26
506.2% vs current
- • -25% vs analyst consensus
- • Terminal growth: 3.3%
- • Beta: 1.90
Base Case
$296.77
855.6% vs current
- • Analyst consensus
- • Terminal growth: 3.8%
- • Beta: 1.52
Bull Case
$447.80
1342.0% vs current
- • +25% vs analyst consensus
- • Terminal growth: 4.3%
- • Beta: 1.29
Key Assumptions & Drivers• Technology Sector
Growth Assumptions (Select Years)
Year 1 Revenue Growth84.18%
Year 3 Revenue Growth15.40%
Year 5 Revenue Growth3.75%
Year 7 Revenue Growth3.75%
Year 10 Revenue Growth3.75%
Terminal Growth Rate3.75%
Margin & Efficiency
Current EBIT Margin6.95%
Terminal EBIT Margin25.00%
Tax Rate13.01%
Historical Capex / Rev0.36%
NWC / Revenue22.22%
Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.
Institutional-Grade Methodology
Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta
Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 28x EV/EBITDA (Technology sector)
This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.