Is SMA Solar Technology AG (ETR:S92) a Bargain at €22.7 Based on Intrinsic and Relative Valuation?

SMA Solar Technology AG (ETR:S92) has long been a cornerstone in the solar inverter market, but its recent financial performance has sparked debate about its valuation. At €22.7 per share, is the stock undervalued, or is the market appropriately pricing in its challenges? A discounted valuation analysis and peer comparison offer clarity.

Intrinsic Valuation: A DCF Perspective

Using a discounted cash flow (DCF) model, SMA’s intrinsic value hinges on its free cash flow (FCF), growth assumptions, and cost of capital. The company generated €122.02 million in FCF over the trailing twelve months [1], with a weighted average cost of capital (WACC) of 4.62% [4]. Assuming a conservative 2.3% annual revenue growth (aligned with forecasts) and a stable FCF margin, the DCF model yields an intrinsic value of approximately €154.74 per share. This calculation assumes perpetual growth and does not account for near-term risks like the HBS division’s €129 million EBIT loss in Q2 2025 [2]. However, the stark discrepancy between this intrinsic value and the current €22.7 share price suggests the market is heavily discounting SMA’s future cash flows, likely due to its recent net loss of €204.22 million and uncertainties around U.S. customs duties [5].

Relative Valuation: A Peer Comparison

SMA’s valuation multiples appear attractive relative to peers. Its P/FCF ratio of 6.44 [2] is significantly lower than Enphase Energy’s 13.21 [4], First Solar’s 12.1 [2], and Nextracker’s 12.35 [5]. This suggests SMA is trading at a steep discount to its peers, even as it maintains a robust FCF of €122.02 million. However, context matters: SMA’s revenue growth is projected at 2.3% annually [5], far below Enphase’s 41.92% [3] or First Solar’s 15.39% [2]. The company’s EBITDA of €70–80 million for 2025 [5] also lags behind peers like Nextracker, which generated $622 million in FCF in FY2025 [2]. While SMA’s restructuring efforts (€100 million in cost cuts) and new product launches (e.g., Sunny Island X) aim to reverse its fortunes, the market may be pricing in prolonged headwinds from its underperforming HBS division and global supply chain challenges [2].

Key Risks and Opportunities

SMA’s intrinsic value calculation assumes a stable FCF growth rate, but its Q2 2025 results reveal fragility. The HBS division’s 48% sales drop in price-sensitive markets like Brazil and India [2] underscores operational risks. Conversely, the Large-Scale & Project Solutions division’s €569 million H1 2025 revenue [2] highlights resilience in utility-scale projects. The company’s revised 2025 guidance (€1.5–1.55 billion in sales) and focus on U.S. manufacturing could mitigate some risks, but uncertainties around the One Big Beautiful Bill (OBBB) and rising material costs remain [5].

Conclusion: A Discounted Bargain or Overcorrected Risk?

SMA’s P/FCF ratio of 6.44 positions it as one of the cheapest solar peers, but its intrinsic valuation of €154.74 per share implies the market is overly pessimistic. If the company executes its cost-cutting plan, stabilizes the HBS division, and benefits from U.S. policy tailwinds, its shares could re-rate. However, investors must weigh the potential for margin compression in a competitive market against SMA’s technological strengths. At €22.7, the stock offers a compelling entry point for those who believe the market is overcorrecting for short-term challenges.

Source:
[1] SMA Solar Technology AG (ETR:S92) Statistics & ...,
https://stockanalysis.com/quote/etr/S92/statistics/
[2] SMA Solar Technology Second Quarter 2025 Earnings,
https://simplywall.st/stocks/de/semiconductors/etr-s92/sma-solar-technology-shares/news/sma-solar-technology-second-quarter-2025-earnings-138-loss-p
[3] Enphase Energy Reports Financial Results for the Second Quarter of 2025,
https://investor.enphase.com/news-releases/news-release-details/enphase-energy-reports-financial-results-second-quarter-2025
[4] SMA Solar Technology AG (XTER:S92) WACC %,
https://www.gurufocus.com/term/wacc/XTER:S92
[5] SMA Solar Technology's Q2 2025 Earnings and Strategic Turnaround in Solar Market Headwinds,
https://www.ainvest.com/news/sma-solar-technology-q2-2025-earnings-strategic-turnaround-solar-market-headwinds-2508/