Semtech Corporation (SMTC) DCF Valuation & Fundamental Primer
Semtech Corporation (SMTC) currently trades at $73.69 with an enterprise value of $858.1M. Our proprietary institutional model rates Semtech Corporation at 59/100 (Grade: B · Mixed Fundamental Profile). The current market price prices in an implied 5-year revenue CAGR of 35.5% vs. historical growth of 11.2% (Aggressive Growth Expectations Priced In).
Institutional fundamental teardown of Semtech Corporation (SMTC) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
Semtech Corporation (SMTC) 3-Scenario DCF Valuation Range
Stress-test SMTC'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: $73.69).
| WACC \ Terminal | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 8.5% | $19.35 -74% | $20.78 -72% | $22.46 -70% | $24.43 -67% | $26.80 -64% |
| 9.3% | $17.01 -77% | $18.14 -75% | $19.44 -74% | $20.94 -72% | $22.71 -69% |
| 10.0% | $15.09 -80% | $15.99 -78% | $17.02 -77% | $18.20 -75% | $19.56 -73% |
| 10.8% | $13.48 -82% | $14.22 -81% | $15.05 -80% | $15.99 -78% | $17.06 -77% |
| 11.5% | $12.11 -84% | $12.73 -83% | $13.41 -82% | $14.17 -81% | $15.03 -80% |
Institutional Software Quality Scorecard (59/100 · Grade B)
Viable recurring software business but carries notable dilution, lower margins, or higher leverage.
Solid cash generation with minor working capital absorption
Disciplined equity compensation well below software industry average
Sub-par gross margins; higher cost of delivery or hardware/services mix
Moderate leverage or cash burn; monitor liquidity runway
Core Investment Strengths & Moats
Key Operational & Dilution Risks
- Lower software gross margins (50.2%), indicating higher hosting or service delivery drag
Reverse-DCF Solver: What Growth is Priced Into SMTC?
The current share price demands 35.5% 5-year CAGR (45.4% net of SBC & dilution)—a +24.4% acceleration over historical run-rate (11.2%). Any growth slowdown risks valuation multiple contraction.
Headline Reverse-DCF ignores Stock-Based Compensation (7.5% of revenue) and annual share dilution (0.9%/yr). Accounting for both requires 45.4% 5-year revenue CAGR to justify $73.69/sh on a true per-share economic cash flow basis.
Semtech Corporation (SMTC) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $909.3M | $909.3M | $1.01B | $1.12B | $1.25B | $1.39B | $1.54B |
| Gross Profit | $456.5M | $456.6M | $507.6M | $564.3M | $627.4M | $697.6M | $775.6M |
| Operating Income (EBIT) | $49.9M | $49.9M | $55.5M | $61.7M | $68.6M | $76.3M | $84.8M |
| Stock-Based Compensation (SBC) | $68.0M | $68.0M | $75.6M | $84.1M | $93.5M | $103.9M | $115.5M |
| Unlevered Free Cash Flow (FCF) | $43.8M | $43.8M | $48.7M | $54.2M | $60.2M | $67.0M | $74.5M |
| SBC-Adjusted True Cash Flow | $-24.3M | $-24.2M | $-26.9M | $-29.9M | $-33.2M | $-37.0M | $-41.1M |
Software & Cloud Services Peer Comparables & Rule of 40 Regression
Rule of 40 vs. EV / Revenue Multiple Regression
OLS Fit: EV/Rev = -0.2 + 0.24 × (Rule of 40) · R² = 38%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 |
|---|---|---|---|---|---|---|---|---|
| Semtech Corporation | SMTC | $6.30B | $909.3M | 50.2% | 4.8% | 16.0% | 7.5% | 7.3× |
| 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 | 7.3× | $6.63B | $6.30B | $73.69 | 0.0% |
| -20% Multiple Compression | 5.8× | $5.30B | $4.98B | $58.19 | -20.0% |
| -35% Multiple Compression | 4.7× | $4.31B | $3.98B | $46.57 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $4.55B | $4.22B | $49.35 | -31.4% |
Frequently Asked Questions: Semtech Corporation (SMTC) Valuation
What is Semtech Corporation (SMTC)'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, Semtech Corporation (SMTC) has a Base Case implied value of $6.22 per share (with a Bear Case of $1.33 and a Bull Case of $12.21), compared to its current price of $73.69. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is Semtech Corporation (SMTC)'s Rule of 40 score and Free Cash Flow margin?
Semtech Corporation achieves a Rule of 40 score of 16.0%, combining a 11.2% revenue growth run-rate with a 4.8% TTM free cash flow margin on $909.3M 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 SMTC stock according to Reverse-DCF analysis?
At $73.69 per share (Enterprise Value of $6.63B), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of 35.5%, compared to Semtech Corporation's historical CAGR of 11.2%. Overall market expectations are rated as "Aggressive Growth Expectations Priced In".
How does Semtech Corporation compare to Software & Cloud Services software peers?
Semtech Corporation (SMTC) earns an institutional Software Quality Score of 59/100 (Grade B — Mixed Fundamental Profile). 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 Semtech Corporation (SMTC)'s valuation?
Semtech Corporation recorded $68.0M in TTM stock-based compensation (7.5% of revenue). When treating SBC as a cash-equivalent compensation expense, Semtech Corporation's SBC-adjusted free cash flow yield is -0.4%, scoring 21/25 on our Shareholder Dilution Friction pillar.