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Semtech (SMTC): analysis traps
Where its figures could mislead a reader, and what to check before taking them at face value · Data: Q2 FY27, to Jul 26, 2026, filed Aug 26, 2026; rules v1.1
Semtech (SMTC): 1 rule of 10 triggered on the filings to Jul 26, 2026: stock compensation added back = no economic cost. 1 to review; 1 with insufficient data; 3 not applicable. Each is a question to verify, with the normal explanation that would produce the same figures.
Check these first
Stock compensation added back = no economic cost Triggered · severity medium · confidence high
Stock compensation was $58M, 5.5% of revenue, in FY26; buybacks were $0 (0.0× the SBC) and the diluted share count still rose 23.4%. 'Adjusted' figures that add SBC back treat pay in shares as free; the cost is borne by every shareholder as dilution, or by the cash spent to buy the shares back.
Innocent reading: A young company paying in equity while it scales; intensity falls as revenue grows.
A precise DCF value = the true value To review · confidence high
The DCF's point value is -2.51 a share (price 103.21); 124% of it is the terminal value, a number about years no one has seen. Moving operating margin by ±3 pts alone takes it from -5.51 to 0.27; across every method the research ran the range is -40 to 300. The value is a range; the decimals are not information.
Innocent reading: A stable, mature business with a narrow range of outcomes, where the point value is a fair summary.
Every rule
A01 FCF growth = the business improved Not triggered confidence medium
Free cash flow rose $121M to $171M; working capital and lower capex explain 27% of it, so most of the gain is in operating cash flow itself.
The figures and how they are read
| Fiscal year before | FY25 |
| Fiscal year | FY26 |
| Operating cash flow, year before | $58M |
| Operating cash flow | $181M |
| Capex, year before | $8M |
| Capex | $10M |
| Free cash flow, year before | $50M |
| Free cash flow | $171M |
| Change in FCF | $121M |
| Change in capex | $2M |
| Working capital: change in its cash contribution | $33M |
| Of which: capex cut | 0.00 |
| Of which: working capital released | $33M |
| Share of the increase that need not repeat | +27.1% |
| Operating cash flow before working capital: change | 90285000.00 |
FCF = operating cash flow − cash capex; ΔFCF = ΔOCF − ΔCapEx; the working-capital part is the change in the cash-bridge items (receivables, inventory, payables, accruals), with the sign of the cash flow statement
Source: FY26 (cash flow statement, fiscal year) · FY25 (cash flow statement, fiscal year before)
A07 Stock compensation added back = no economic cost Triggered severity medium · confidence high
Stock compensation was $58M, 5.5% of revenue, in FY26; buybacks were $0 (0.0× the SBC) and the diluted share count still rose 23.4%. 'Adjusted' figures that add SBC back treat pay in shares as free; the cost is borne by every shareholder as dilution, or by the cash spent to buy the shares back.
The figures and how they are read
| Fiscal year | FY26 |
| Stock compensation | $58M |
| Revenue | $1.0B |
| SBC / revenue | +5.5% |
| Buybacks | 0 |
| Buybacks / SBC | 0.0 |
| Diluted shares, year before | 71.6M shares |
| Diluted shares | 88.4M shares |
| Diluted shares: change | +23.4% |
SBC / revenue from the cash flow statement's add-back; the diluted weighted share count year over year; buybacks from the financing section
Source: FY26 (stock compensation, buybacks and the diluted share count, fiscal year)
What would explain it innocently
- A young company paying in equity while it scales; intensity falls as revenue grows
- Buybacks at prices below intrinsic value make up for the dilution over time
- A one-off grant (an acquisition, a founder award) rather than a steady level
What to look for in the filing
- The share count after the latest buybacks (the next 10-Q's cover)
- The price paid for the buybacks against the shares' value
- Unvested awards outstanding
What would show the trap does not apply
- The diluted share count falls over two years with buybacks at least equal to the stock compensation
- Stock compensation falls as a share of revenue in each of the next two years
Look again: next filing.
B02 Receivables growing = future cash is certain Not triggered confidence medium
Receivables grew 5% against revenue 16% in Q1 FY27; DSO 52 against a median of 56: collections are keeping pace with sales.
The figures and how they are read
| Quarter | Q1 FY27 |
| Revenue, year over year | +15.9% |
| Receivables, year over year | +5.5% |
| Quarter before | Q4 FY26 |
| Revenue y/y, quarter before | +9.3% |
| Receivables y/y, quarter before | -1.2% |
| Days sales outstanding | 52.4 |
| DSO, median of eight quarters | 56.4 |
| Receivables | $175M |
| Revenue | $291M |
receivables and revenue against the same quarter a year earlier; DSO = receivables / quarterly revenue × days, against the median of the eight quarters before
Source: Q1 FY27 (receivables and revenue) · Q1 FY26 (the same quarter a year earlier)
B08 Adjusted profit = economic profit Insufficient data
no reconciliation table read from the releases yet and fewer than three quarters with both an adjusted and a GAAP EPS
C02 Low net debt = no refinancing risk Not triggered confidence medium
Nothing comes due within a year; net debt is $329M.
The figures and how they are read
| Cash and investments | $163M |
| Debt | $492M |
| Net debt | $329M |
| Due within a year | 0 |
| Read from | the current portion of debt on the balance sheet |
| Free cash flow, twelve months | $173M |
| Cash plus free cash flow | $337M |
| Coverage of what is due | — |
| Due in the second year | — |
| Balance sheet date | 2026-04-26 |
due within a year from the maturity table (else the current portion of debt), against cash and investments plus free cash flow over the last twelve months (zero if negative); no credit lines assumed
Source: 2026-04-26 (debt maturities, cash and investments)
D03 EPS growth = profit growth Not triggered confidence high
EPS rose 25% and net income rose 37% in Q1 FY27; the share count rose 9.4%: EPS growth follows profit growth.
The figures and how they are read
| Quarter | Q1 FY27 |
| Quarter before | Q1 FY26 |
| EPS, year before | $0.22 |
| EPS | $0.27 |
| Net income, year before | $19M |
| Net income | $27M |
| Diluted shares, year before | 89.6M shares |
| Diluted shares | 98.0M shares |
| EPS growth | +25.5% |
| Net income growth | +37.3% |
| Diluted shares: change | +9.4% |
| eps from profit | $0.08 |
| eps from share count | -$0.03 |
EPS and net income against the same quarter a year earlier; the EPS bridge attributes the change to profit first, then to the share count (the order is fixed and disclosed)
Source: Q1 FY27 (net income, diluted shares, EPS) · Q1 FY26 (the same quarter a year earlier)
E02 Low P/E at a cyclical peak = undervalued Not applicable
a loss on a trailing or mid-cycle basis: the P/E has no meaning
E07 A precise DCF value = the true value To review confidence high
The DCF's point value is -2.51 a share (price 103.21); 124% of it is the terminal value, a number about years no one has seen. Moving operating margin by ±3 pts alone takes it from -5.51 to 0.27; across every method the research ran the range is -40 to 300. The value is a range; the decimals are not information.
The figures and how they are read
| dcf value | -2.51 |
| price | 103.21 |
| terminal value share | +124.5% |
| swing by input | Operating margin / ±3 pts / -5.51 / 0.27; Capex (share of revenue) / ±1 pt / -3.03 / -1.99; Working capital per $ of growth / ±10 pts / -2.97 / -2.05; WACC / ±1 pt / -2.63 / -2.35 |
| range all methods | -39.52; 300.0 |
the DCF's point value against the share of it that is the terminal value and the value at each input moved by one step (growth ±5 pts, WACC ±1 pt, margin ±3 pts …); the range across every method the research ran
Source: 2026-11-08 (valuation research)
What would explain it innocently
- A stable, mature business with a narrow range of outcomes, where the point value is a fair summary
- The inputs that matter most are themselves well known (a regulated return, a long contract)
What to look for in the filing
- Which input you believe differs from the research's and why
- What the price implies for growth (the reverse DCF on the fair-value page)
What would show the trap does not apply
- The DCF's value is robust to the terminal growth and discount rate (the range's low end is still above the price)
- The company's cash flows over the next three years track the DCF's early years
Look again: next filing.
J06 A bank's low P/E and high profit = safe Not applicable
not a bank
J08 A REIT's low net income = the dividend is unsafe Not applicable
not a REIT
What the statuses mean
Triggered: the filings show the pattern; read the normal explanations and the missing evidence before concluding anything. To review: one quarter or a weak signal; a reader's judgement, not a pattern. Not triggered: the pattern is absent on these figures. Insufficient data: the filings read so far do not hold what the rule needs; this is not a clean bill. Not applicable: the rule is not meant for this kind of company (a bank's working capital, a loss-making quarter's EPS growth). Out of date: the latest filing is more than fifteen months old.
Severity is what the pattern could mean for cash, value or solvency; confidence is how reliable the inputs and the reading are. The two are kept apart.
Record a view
A reader's judgement, grounds, what would change it and the next review; kept in the browser (needs JavaScript).
Every rule and the companies it triggers on → Semtech: cash flow → Earnings quality score →
Each rule reads the company's own filings by a fixed formula and says what would explain the same figures innocently. A triggered rule is a question to verify, not a finding of manipulation, and not a view on the stock. Missing data is shown as missing, never as clear. Not investment advice.