SUPER MICRO COMPUTER INC (NASDAQ:SMCI): A Prime Candidate for Affordable Growth Investing

Investors looking for growth chances often face the task of finding companies that mix solid expansion potential with fair prices, steering clear of overpriced momentum stocks. The "Affordable Growth" method tackles this by filtering for stocks showing strong growth paths, good profitability, firm financial condition, and appealing prices. This method focuses on firms set to provide lasting appreciation without requiring too high a premium, matching the ideas of Growth at a Reasonable Price (GARP) investing. One such pick coming from this filter is SUPER MICRO COMPUTER INC (NASDAQ:SMCI), which deserves more study through a basic viewpoint.

Growth Path

Super Micro Computer shows outstanding growth traits that are the center of its investment attraction. The company has shown notable increases in both revenue and earnings, with past performance pointing to solid momentum and future estimates backing continued progress.

• Revenue Growth: In the last year, revenue jumped by 46.59%, while the average yearly growth over recent years is a notable 45.76%.
• Earnings Growth: Even with a small drop of -5.89% in EPS last year, the long-term average yearly EPS growth stays strong at 50.41%.
• Future Outlook: Experts predict continued growth with EPS set to rise by 27.85% each year and revenue expected to grow by 19.86% per year in the next periods.

This forceful growth picture, especially in the growing server and data center infrastructure field, places SMCI to benefit from rising need for high-performance computing and artificial intelligence options.

Price Evaluation

The stock's price offers a persuasive case for being affordable within its growth setting. While not very cheap, SMCI trades at levels that seem fair compared to both its sector and wider market benchmarks.

• P/E Ratio: At 19.47, the trailing P/E ratio is under the sector average of 28.01 and the S&P 500 average of 26.84.
• Forward P/E: The forward P/E of 15.07 compares well to the S&P 500's 22.48 and is about level with sector companions.
• Growth Adjustment: The PEG ratio, which includes earnings growth forecasts, shows the stock might be priced low for its expected expansion speed.

These price measures indicate investors are not paying too high a price for SMCI's growth possibility, making a good risk-reward mix for growth-focused portfolios.

Profitability and Financial Condition

Beyond growth and price, SMCI shows force in profitability and financial steadiness, important parts for lasting growth investing. The company creates good returns on its assets and equity while keeping a firm financial base.

• Profitability Measures:

  • Return on Assets of 7.48% puts it in the top group of its sector
  • Return on Equity of 16.64% does better than 85% of sector peers
  • Profit margin of 4.77% beats most rivals even while working in a competitive hardware industry

• Financial Condition Signs:

  • Very good liquidity with current ratio of 5.32 and quick ratio of 3.32
  • Forceful solvency place with Altman-Z score of 4.93 showing low bankruptcy danger
  • Controllable debt levels with debt-to-equity ratio of 0.74

These points give trust that the company's growth is based on a lasting operational base instead of financial borrowing or aggressive accounting.

Investment Points

While SMCI offers a persuasive growth narrative at a fair price, investors should be aware of several points. The company works in the changing technology hardware sector, which might see times of lower demand. Also, the small fall in recent EPS and the view that future growth speeds may not keep the extraordinary rate of recent years deserve notice. However, the company's place in high-growth areas like AI infrastructure and edge computing gives balancing positive catalysts.

The mix of forceful growth measures, fair price levels, good profitability, and firm financial base makes SUPER MICRO COMPUTER INC a noteworthy pick for investors using an affordable growth method. The company's basic profile, explained in the full fundamental analysis report, suggests it has the traits wanted by those searching for growth at fair prices.

For investors curious to find more companies that fit similar affordable growth rules, more filtering outcomes can be viewed through our Affordable Growth stock screener.

Disclaimer: This analysis is given for information only and does not make up investment advice, a suggestion, or an offer to buy or sell any securities. Investors should do their own study and talk with a qualified financial advisor before making investment choices.