- Super Micro Computer, Inc. reported mixed FY Q4 results.
- However, I see strong demand for its products to continue, judging by the record-low inventory data reported.
- I expect the rapid inventory turnaround to keep improving its cash conversation cycle.
- For investors who can look past the quarterly fluctuations, the stock is an excellent GARP candidate, with PEG ratio substantially below 1x.
- I am Envision Research. I hold a Masters in Quant Investment. I lead the investing group Envision Early Retirement where we offer proven solutions to generate both high income & high growth with isolated risks.
SMCI stock Q4 recap
My last article on Super Micro Computer, Inc. (NASDAQ:SMCI) was a preview of its FY Q4 earnings report. That article was titled “Super Micro Computer Q4 Preview: A Swing Trade Setup (Technical Analysis)” and was published shortly before the release of its Q4 earnings report (“ER”) on August 6, 2024. As the title suggests, the article is more oriented toward the near term (as a swing trade) with an emphasis on its recent technical trading patterns.
With the release of its Q4 ER, I think it would be helpful to write this follow-up article with a focus on its business fundamentals, especially the new developments reported in its ER. Meanwhile, I will also switch my perspective from a short-term swing trade to the next ~2 years or so. In a nutshell, what I see is an excellent GARP (growth at a reasonable opportunity) for the next few years. My investment approach with high-growth stocks is largely shaped by the thinking of Peter Lynch (I learn from the best). And as you will see in the remainder of this article, SMCI’s Q4 earnings remind me of Lynch’s wisdom on the use of inventory data. Despite all the unevenness in its results, its inventory sits at near a record low, providing a reliable signal in my view of the robust demand for its products. After all, inventory does not lie.
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