When Should You Buy Super Micro Computer, Inc. (NASDAQ:SMCI)?

Super Micro Computer, Inc. (NASDAQ:SMCI) received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$353 at one point, and dropping to the lows of US$232. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Super Micro Computer's current trading price of US$254 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Super Micro Computer’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Super Micro Computer

What's The Opportunity In Super Micro Computer?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Super Micro Computer’s ratio of 22.14x is trading in-line with its industry peers’ ratio, which means if you buy Super Micro Computer today, you’d be paying a relatively sensible price for it. Is there another opportunity to buy low in the future? Since Super Micro Computer’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Super Micro Computer?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Super Micro Computer's earnings over the next few years are expected to increase by 82%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has already priced in SMCI’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at SMCI? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on SMCI, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for SMCI, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into Super Micro Computer, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 1 warning sign with Super Micro Computer, and understanding this should be part of your investment process.

If you are no longer interested in Super Micro Computer, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.