Penguin Solutions, Inc. (NASDAQ: PENG)

Sector: Technology Industry: Information Technology Services CIK: 0001616533
Market Cap 1.07 Bn
P/B 2.71
P/E 69.07
P/S 0.78
ROIC (Qtr) 5.98
Div Yield % 0.00
Rev 1y % (Qtr) 8.60
Total Debt (Qtr) 524.57 Mn
Debt/Equity (Qtr) 1.33

About

SMART Global Holdings, Inc. (SGH), a technology company, operates in the computing, memory, and LED industries. The company designs, builds, and manages high-performance, high-availability enterprise solutions, serving a diverse range of customers across various markets. SGH's main business activities revolve around providing specialized solutions in the memory, computing, and LED sectors. The company's operations span across multiple countries, offering a wide range of products and services to its clients. The company generates revenue through...

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Price action

Investment thesis

Bull case

  • Healthy cash reserves of 453.75M provide 22.75x coverage of short-term debt 19.95M, demonstrating strong liquidity position and minimal refinancing risk.
  • Operating cash flow of 109.08M provides exceptional 31.67x coverage of minority interest expenses 3.44M, showing strong core operations.
  • Operating cash flow of 109.08M provides exceptional 14.93x coverage of interest expenses 7.30M, showing strong debt service capability.
  • Strong tangible asset base of 1.38B provides 2.64x coverage of total debt 524.57M, indicating robust asset backing and low credit risk.
  • Robust free cash flow of 100.07M exceeds capital expenditure of 9.01M by 11.10x, indicating strong organic growth funding capability.

Bear case

  • Investment activities of 24.97M provide weak support for R&D spending of 79.80M, which is 0.31x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Operating cash flow of 109.08M provides insufficient coverage of deferred revenue obligations of 73.89M, which is 1.48x, raising concerns about future service delivery capabilities.
  • The company's operating cash flow of 109.08M shows concerning coverage of stock compensation expenses of 41.18M, with a 2.65 ratio indicating potential earnings quality issues.
  • Operating earnings of 52.76M show weak coverage of depreciation charges of 56.22M, with a 0.94 ratio indicating high capital intensity and potential reinvestment needs.
  • Free cash flow of 100.07M represents just -0.50x of debt issuance (200.01M), suggesting concerning reliance on leverage rather than internal cash generation for growth.

Peer comparison

Companies in the Information Technology Services
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 IBM International Business Machines Corp 279.99 Bn 35.41 4.28 66.57 Bn
2 ACN Accenture plc 168.17 Bn 22.09 2.38 8.20 Bn
3 INFY Infosys Ltd 74.96 Bn 23.74 3.89 -
4 CTSH Cognizant Technology Solutions Corp 41.45 Bn 19.48 1.99 1.17 Bn
5 FIS Fidelity National Information Services, Inc. 35.21 Bn 231.62 3.36 13.00 Bn
6 WIT Wipro Ltd 29.93 Bn 19.70 2.97 1.95 Bn
7 BR Broadridge Financial Solutions, Inc. 26.38 Bn 28.51 3.74 3.28 Bn
8 LDOS Leidos Holdings, Inc. 23.72 Bn 16.88 1.37 5.23 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.67 1.44
EV to Cash from Ops. EV/CFO 9.91 5.63
EV to Debt EV to Debt 2.06 8.06
EV to EBIT EV/EBIT 20.49 -4.05
EV to EBITDA EV/EBITDA 9.45 -0.52
EV to Free Cash Flow [EV/FCF] EV/FCF 10.80 -1.66
EV to Market Cap EV to Market Cap 1.01 1.35
EV to Revenue EV/Rev 0.79 57.14
Price to Book Value [P/B] P/B 2.71 3.34
Price to Earnings [P/E] P/E 69.07 -5.47
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 1.56 -0.83
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 0.66
Dividend per Basic Share Div per Share (Qtr) 0.00 0.47
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 6.24
Interest Coverage Int. cover (Qtr) 7.22 -319.17
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 53.60 -253.62
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 18.43 114.15
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 35.23
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 274.44 -22.49
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 36.11 -25.03
EBIT Growth (1y) % EBIT 1y % (Qtr) 491.53 -82.44
EBT Growth (1y) % EBT 1y % (Qtr) 208.61 97.07
EPS Growth (1y) % EPS 1y % (Qtr) 129.00 147.29
FCF Growth (1y) % FCF 1y % (Qtr) 73.25 -8,638.64
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 15.70 -8.24
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.85 0.78
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.01
Cash Ratio Cash Ratio (Qtr) 0.96 0.66
Current Ratio Curr Ratio (Qtr) 2.25 2.12
Debt to Equity Ratio Debt/Equity (Qtr) 1.33 0.88
Interest Cover Ratio Int Coverage (Qtr) 7.22 -319.17
Times Interest Earned Times Interest Earned (Qtr) 7.22 -319.17
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 8.00 -550.76
EBIT Margin % EBIT Margin % (Qtr) 3.85 -775.74
EBT Margin % EBT Margin % (Qtr) 3.32 -827.89
Gross Margin % Gross Margin % (Qtr) 28.80 24.07
Net Profit Margin % Net Margin % (Qtr) 1.10 -830.34