SMCI

We rate Super Micro Computer, Inc. (SMCI) as a Reduce with a composite score of 42.4/100 at a current price of $31.08. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in value (55th percentile) and quality (48th percentile), which together account for the majority of the composite score. Offsetting weakness in momentum (19th percentile) and stability (32th percentile) tempers our overall conviction. We assign a No Moat rating (39/100), Very High uncertainty, and Poor capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs; balance sheet deleveraging progress; sustainability of the current growth rate. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Super Micro Computer, Inc. holds a top-quartile position (#0 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 42.4/100 places it at rank #3204 in our full 7,333-stock universe. With a $28.5B market capitalization, Super Micro Computer, Inc. operates at meaningful scale within the Manufacturing sector, providing competitive advantages in distribution, procurement, and customer reach.

Revenue is growing at 114%, though momentum at the 19th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 9% (-33.3pp vs sector) narrow to operating margins of 4% (+3.0pp vs sector) and net margins of 3.6%, yielding a gross-to-net conversion rate of 39%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $31.08, Super Micro Computer, Inc. is trading near fair value based on current fundamentals. Our value factor score of 55/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 19.4x (roughly in line with the sector median of 22.3x), EV/EBITDA of 16.6x (at a premium), P/B of 2.8x, P/S of 0.7x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Very High uncertainty rating to Super Micro Computer, Inc.. The stock exhibits multiple compounding risk factors: elevated market sensitivity (beta of 1.93), significant leverage (300% debt-to-equity), below-average price stability (32th percentile). The extreme uncertainty around future cash flows makes precise valuation difficult, and the range of outcomes is exceptionally wide. Only investors with high risk tolerance and extended time horizons should consider this name.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 1.93); significant leverage (300% debt-to-equity); below-average price stability (32th percentile); the combination of leverage (300% D/E) and thin margins (3.6% net) amplifies downside risk. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 32th percentile and quality factor at the 48th percentile provide a quantitative summary of the overall risk landscape.

We identify limited risk mitigants at this time, which contributes to our very high uncertainty assessment. Investors should monitor for improvement in balance sheet metrics, margin stability, and business predictability that could warrant a downgrade in our risk assessment over time.

We rate Super Micro Computer, Inc.'s capital allocation as Poor. Key concerns include elevated leverage (300% D/E). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Super Micro Computer, Inc. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, Super Micro Computer, Inc. receives a Reduce rating with a composite score of 42.4/100 (rank #3204 of 7,333). Our quantitative framework assigns a No Moat (39/100, trend: stable), Very High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 38/100.

Our analysis does not support a constructive view on Super Micro Computer, Inc. at this time. The combination of limited competitive advantages, very high uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.