We assign a fundamental rating of 3 out of 10 to SGH. SGH was compared to 113 industry peers in the Semiconductors & Semiconductor Equipment industry. Both the profitability and financial health of SGH have multiple concerns. SGH has a bad growth rate and is valued cheaply.

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1. Profitability

2. Health

3. Growth

4. Valuation

5. Dividend

1. Profitability

1.1 Basic Checks

In the past year SGH was profitable.
SGH had a positive operating cash flow in the past year.
In multiple years SGH reported negative net income over the last 5 years.
SGH had a positive operating cash flow in 4 of the past 5 years.

1.2 Ratios

SGH has a worse Return On Assets (-10.91%) than 73.39% of its industry peers.
SGH has a worse Return On Equity (-39.85%) than 78.90% of its industry peers.
SGH has a Return On Invested Capital of 1.48%. This is comparable to the rest of the industry: SGH outperforms 50.46% of its industry peers.

		Industry Rank	Sector Rank
ROA	-10.91%
ROE	-39.85%
ROIC	1.48%

ROA(3y)-2.21%

ROA(5y)0.1%

ROE(3y)-19.83%

ROE(5y)-8.22%

ROIC(3y)N/A

ROIC(5y)N/A

1.3 Margins

The Operating Margin of SGH (2.19%) is comparable to the rest of the industry.
In the last couple of years the Operating Margin of SGH has declined.
The Gross Margin of SGH (33.50%) is worse than 66.06% of its industry peers.
SGH's Gross Margin has improved in the last couple of years.

		Industry Rank	Sector Rank
OM	2.19%
PM (TTM)	N/A
GM	33.5%

OM growth 3Y-15.35%

OM growth 5Y-28.52%

PM growth 3YN/A

PM growth 5YN/A

GM growth 3Y14.32%

GM growth 5Y4.95%

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ROA

ROE

ROIC

Operating and Profit Margin

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2. Health

2.1 Basic Checks

The Return on Invested Capital (ROIC) is below the Cost of Capital (WACC), so SGH is destroying value.
There is no outstanding debt for SGH. This means it has a Debt/Equity and Debt/FCF ratio of 0 and it is amongst the best of the sector and industry.

2.2 Solvency

SGH has an Altman-Z score of 1.81. This is a bad value and indicates that SGH is not financially healthy and even has some risk of bankruptcy.
SGH has a Altman-Z score of 1.81. This is comparable to the rest of the industry: SGH outperforms 40.37% of its industry peers.
The Debt to FCF ratio of SGH is 6.03, which is on the high side as it means it would take SGH, 6.03 years of fcf income to pay off all of its debts.
With a Debt to FCF ratio value of 6.03, SGH perfoms like the industry average, outperforming 53.21% of the companies in the same industry.
SGH has a Debt/Equity ratio of 1.58. This is a high value indicating a heavy dependency on external financing.
SGH has a worse Debt to Equity ratio (1.58) than 88.07% of its industry peers.

		Industry Rank	Sector Rank
Debt/Equity	1.58
Debt/FCF	6.03
Altman-Z	1.81

ROIC/WACC0.13

WACC11.52%

2.3 Liquidity

SGH has a Current Ratio of 2.68. This indicates that SGH is financially healthy and has no problem in meeting its short term obligations.
With a Current ratio value of 2.68, SGH perfoms like the industry average, outperforming 46.79% of the companies in the same industry.
A Quick Ratio of 2.18 indicates that SGH has no problem at all paying its short term obligations.
The Quick ratio of SGH (2.18) is comparable to the rest of the industry.

		Industry Rank	Sector Rank
Current Ratio	2.68
Quick Ratio	2.18

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WACC

Debt/Equity

How to determine the health of a company

Altman-Z score

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3. Growth

3.1 Past

SGH shows a strong negative growth in Earnings Per Share. In the last year the EPS decreased by -51.17%.
SGH shows a decrease in Earnings Per Share. Measured over the last years, the EPS has been decreasing by -5.74% yearly.

EPS 1Y (TTM)-51.17%

EPS 3Y-21.66%

EPS 5Y-5.74%

EPS Q2Q%5.71%

Revenue 1Y (TTM)N/A

Revenue growth 3YN/A

Revenue growth 5YN/A

Sales Q2Q%-1.74%

3.2 Future

SGH is expected to show a strong growth in Earnings Per Share. In the coming years, the EPS will grow by 57.50% yearly.
The Revenue is expected to grow by 14.97% on average over the next years. This is quite good.

EPS Next Y55.36%

EPS Next 2Y57.5%

EPS Next 3YN/A

EPS Next 5YN/A

Revenue Next Year15.97%

Revenue Next 2Y14.97%

Revenue Next 3YN/A

Revenue Next 5YN/A

3.3 Evolution

The EPS growth rate is accelerating: in the next years the growth will be better than in the last years.

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4. Valuation

4.1 Price/Earnings Ratio

A Price/Earnings ratio of 16.68 indicates a correct valuation of SGH.
87.16% of the companies in the same industry are more expensive than SGH, based on the Price/Earnings ratio.
The average S&P500 Price/Earnings ratio is at 28.82. SGH is valued slightly cheaper when compared to this.
The Price/Forward Earnings ratio is 10.74, which indicates a very decent valuation of SGH.
93.58% of the companies in the same industry are more expensive than SGH, based on the Price/Forward Earnings ratio.
When comparing the Price/Forward Earnings ratio of SGH to the average of the S&P500 Index (25.95), we can say SGH is valued rather cheaply.

		Industry Rank	Sector Rank
PE	16.68
Fwd PE	10.74

4.2 Price Multiples

Based on the Enterprise Value to EBITDA ratio, SGH is valued a bit cheaper than the industry average as 77.06% of the companies are valued more expensively.
Based on the Price/Free Cash Flow ratio, SGH is valued cheaper than 96.33% of the companies in the same industry.

		Industry Rank	Sector Rank
P/FCF	9.97
EV/EBITDA	15.46

4.3 Compensation for Growth

SGH's low PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a rather cheap valuation of the company.
SGH's earnings are expected to grow with 57.50% in the coming years. This may justify a more expensive valuation.