Yahoo Finance Super Micro Computer (NASDAQ:SMCI) Ticks All The Boxes When It Comes To Earnings Growth
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
In contrast to all that, many investors prefer to focus on companies like Super Micro Computer (NASDAQ:SMCI), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
Check out our latest analysis for Super Micro Computer
Super Micro Computer's Improving Profits
In the last three years Super Micro Computer's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. It's good to see that Super Micro Computer's EPS has grown from US$11.06 to US$12.51 over twelve months. That's a 13% gain; respectable growth in the broader scheme of things.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. While we note Super Micro Computer achieved similar EBIT margins to last year, revenue grew by a solid 39% to US$9.3b. That's progress.
In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.
While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Super Micro Computer?
Are Super Micro Computer Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$45b company like Super Micro Computer. But we do take comfort from the fact that they are investors in the company. We note that their impressive stake in the company is worth US$6.4b. Coming in at 14% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. Very encouraging.
It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. The median total compensation for CEOs of companies similar in size to Super Micro Computer, with market caps over US$8.0b, is around US$14m.
The Super Micro Computer CEO received total compensation of only US$1.0 in the year to June 2023. You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Does Super Micro Computer Deserve A Spot On Your Watchlist?
As previously touched on, Super Micro Computer is a growing business, which is encouraging. Earnings growth might be the main attraction for Super Micro Computer, but the fun does not stop there. With a meaningful level of insider ownership, and reasonable CEO pay, a reasonable mind might conclude that this is one stock worth watching. It is worth noting though that we have found 4 warning signs for Super Micro Computer (2 are significant!) that you need to take into consideration.
There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of companies which have demonstrated growth backed by recent insider purchases.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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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.
