SMART Global Holdings, Inc. (SGH) DCF Valuation & Fundamental Primer
SMART Global Holdings, Inc. (SGH) currently trades at $20.85 with an enterprise value of $1.38B. Our proprietary institutional model rates SMART Global Holdings, Inc. at 88/100 (Grade: A+ · Elite SaaS Compounder). The current market price prices in an implied 5-year revenue CAGR of 10.9% vs. historical growth of 19.1% (Substantial Margin of Safety).
Institutional fundamental teardown of SMART Global Holdings, Inc. (SGH) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
SMART Global Holdings, Inc. (SGH) 3-Scenario DCF Valuation Range
Stress-test SGH's 5-year growth, target FCF margin, WACC, terminal methodology, and SBC/dilution friction in real time.
Split between 5-Year Explicit Cash Flows and Discounted Terminal Value
2D Institutional Valuation Sensitivity Heatmap
Implied share price & upside/downside spread across 25 valuation states (Current Price: $20.85).
| WACC \ Terminal | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 8.5% | $30.99 +49% | $32.84 +58% | $35.00 +68% | $37.55 +80% | $40.62 +95% |
| 9.3% | $27.98 +34% | $29.44 +41% | $31.11 +49% | $33.06 +59% | $35.34 +69% |
| 10.0% | $25.51 +22% | $26.68 +28% | $28.01 +34% | $29.53 +42% | $31.28 +50% |
| 10.8% | $23.44 +12% | $24.40 +17% | $25.47 +22% | $26.69 +28% | $28.07 +35% |
| 11.5% | $21.69 +4% | $22.48 +8% | $23.37 +12% | $24.35 +17% | $25.46 +22% |
Institutional Software Quality Scorecard (88/100 · Grade A+)
Exceptional unit economics, disciplined equity dilution, and fortress balance sheet.
Elite deferred revenue float; FCF exceeds operating income by >20%
Standard software SBC dilution; modest equity transfer to employees
Elite Tier-1 SaaS compounder with high gross margin and superior Rule of 40
Positive net cash cushion; self-funding operations with zero insolvency risk
Core Investment Strengths & Moats
- High-grade cash conversion: FCF is 1145% of EBIT driven by upfront annual collections
- Top-quartile software unit economics: 78.3% gross margin and 42.0% Rule of 40 score
- Net cash positive: $104.2M balance sheet buffer
Key Operational & Dilution Risks
Reverse-DCF Solver: What Growth is Priced Into SGH?
The current share price only requires 10.9% 5-year CAGR (22.2% dilution-adjusted), well below historical growth of 19.1%. If the company maintains baseline execution, there is asymmetric upside.
Headline Reverse-DCF ignores Stock-Based Compensation (13.2% of revenue) and annual share dilution (1.8%/yr). Accounting for both requires 22.2% 5-year revenue CAGR to justify $20.85/sh on a true per-share economic cash flow basis.
SMART Global Holdings, Inc. (SGH) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $225.2M | $225.2M | $268.2M | $319.4M | $380.4M | $453.0M | $539.6M |
| Gross Profit | $176.3M | $176.3M | $210.0M | $250.1M | $297.8M | $354.7M | $422.5M |
| Operating Income (EBIT) | $4.5M | $4.5M | $5.4M | $6.4M | $7.6M | $9.1M | $10.8M |
| Stock-Based Compensation (SBC) | $29.7M | $29.7M | $35.4M | $42.2M | $50.2M | $59.8M | $71.2M |
| Unlevered Free Cash Flow (FCF) | $51.6M | $51.6M | $61.4M | $73.1M | $87.1M | $103.7M | $123.6M |
| SBC-Adjusted True Cash Flow | $21.8M | $21.8M | $26.0M | $31.0M | $36.9M | $43.9M | $52.3M |
Software & Cloud Services Peer Comparables & Rule of 40 Regression
Rule of 40 vs. EV / Revenue Multiple Regression
OLS Fit: EV/Rev = -29.7 + 0.81 × (Rule of 40) · R² = 83%Stocks below the gold regression line trade at a discount relative to their Rule of 40 compounding efficiency.
| Company | Ticker | Market Cap | TTM Revenue | Gross Margin | FCF Margin | Rule of 40 | SBC % Rev | EV / Rev |
|---|---|---|---|---|---|---|---|---|
| SMART Global Holdings, Inc. | SGH | $1.10B | $225.2M | 78.3% | 22.9% | 42.0% | 13.2% | 4.4× |
| ServiceNow | NOW | $152.61B | $10.98B | 79.2% | 31.1% | 54.2% | 15.9% | 13.9× |
| Workday, Inc. | WDAY | $50.35B | $8.00B | 75.0% | 27.4% | 43.9% | 19.0% | 6.4× |
| Salesforce | CRM | $217.10B | $37.90B | 77.2% | 32.8% | 42.8% | 8.4% | 5.8× |
| Datadog | DDOG | $46.05B | $2.68B | 80.8% | 31.1% | 57.7% | 21.3% | 17.4× |
| Snowflake Inc. | SNOW | $71.79B | $3.63B | 66.5% | 25.2% | 57.7% | 40.8% | 20.0× |
| Hubspot | HUBS | $19.89B | $2.63B | 85.0% | 21.3% | 52.7% | 19.2% | 7.7× |
| Peer Cohort Median Benchmark (N=6) | 78.2% | 29.2% | 53.5% | 19.1% | 10.8× | |||
EV / Revenue Multiple Compression Stress Test
| Multiple Scenario | EV / Revenue | Implied Enterprise Value | Implied Equity Value | Implied Share Price | Delta vs Current |
|---|---|---|---|---|---|
| Current Multiple | 4.4× | $999.0M | $1.10B | $20.85 | 0.0% |
| -20% Multiple Compression | 3.5× | $799.2M | $903.5M | $17.07 | -20.0% |
| -35% Multiple Compression | 2.9× | $649.4M | $753.6M | $14.24 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $1.13B | $1.23B | $23.25 | +12.7% |
Frequently Asked Questions: SMART Global Holdings, Inc. (SGH) Valuation
What is SMART Global Holdings, Inc. (SGH)'s intrinsic DCF valuation and implied share price?
Based on audited SEC 10-K/10-Q filings and a 5-year 3-statement discounted cash flow (DCF) model, SMART Global Holdings, Inc. (SGH) has a Base Case implied value of $28.01 per share (with a Bear Case of $13.41 and a Bull Case of $48.04), compared to its current price of $20.85. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is SMART Global Holdings, Inc. (SGH)'s Rule of 40 score and Free Cash Flow margin?
SMART Global Holdings, Inc. achieves a Rule of 40 score of 42.0%, combining a 19.1% revenue growth run-rate with a 22.9% TTM free cash flow margin on $225.2M in trailing twelve-month revenue. In the Software & Cloud Services peer cohort, the median Rule of 40 benchmark is 53.5%.
What revenue growth rate is priced into SGH stock according to Reverse-DCF analysis?
At $20.85 per share (Enterprise Value of $999.0M), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of 10.9%, compared to SMART Global Holdings, Inc.'s historical CAGR of 19.1%. Overall market expectations are rated as "Substantial Margin of Safety".
How does SMART Global Holdings, Inc. compare to Software & Cloud Services software peers?
SMART Global Holdings, Inc. (SGH) earns an institutional Software Quality Score of 88/100 (Grade A+ — Elite SaaS Compounder). Across its Software & Cloud Services peer group (NOW, WDAY, CRM, DDOG, SNOW), the cohort trades at a median EV/TTM Revenue multiple of 10.8× and a median gross margin of 78.2%.
How does Stock-Based Compensation (SBC) impact SMART Global Holdings, Inc. (SGH)'s valuation?
SMART Global Holdings, Inc. recorded $29.7M in TTM stock-based compensation (13.2% of revenue). When treating SBC as a cash-equivalent compensation expense, SMART Global Holdings, Inc.'s SBC-adjusted free cash flow yield is 2.0%, scoring 16/25 on our Shareholder Dilution Friction pillar.