GAP: Not rated
Published 16 Sep 2026, 16:38 BST. This is the frozen version, not the current recommendation.
Why this assessment was issued
Stored financial statements changed; the revised figures need checking. The model version changed. Current data checks do not support an active rating. The published model version has been replaced. Record the new calculation basis even if the rating is unchanged.
A target is not published until the required checks pass. Recorded investments are material to equity value but have no reviewed valuation or tax treatment in this operating model. Financial investments must also be excluded from capital needed to fund sales growth.
Supporting evidence
Year-to-date profit has improved
Across 2 completed quarters since 2026-01-31, net income was 840.0m versus 409.0m in the matching prior-year periods (USD). Check whether the latest quarter changes that direction.
More sales are becoming operating profit
The latest quarterly operating margin was 18.5%, +10.7 percentage points from a year earlier. Compare the sales and margin contributions below.
Opposing evidence
Capital spending changes the cash picture
Operating cash covers 1.23 times profit, but cash after capital spending covers 0.77 times. Cash generation is stronger before the investment bill is paid.
Quarterly sales fell
Revenue changed -2.0% from the same quarter last year, through 2026-07-31. The previous quarter’s year-on-year change was +1.0%.
Original assumptions and checks
| tax | 26.776277157956546 |
|---|---|
| price | 21.51 |
| years | 1.1279945242984257 |
| claims | 0.0 |
| growth | 1.5393492491328042 |
| margin | 10.98786376092914 |
| profit | 1247000000.0 |
| shares | 351270137.0 |
| cash_ok | True |
| debt_ok | True |
| growths | [2.9511621833376855, 2.096890817064345, 0.9818076812012633, -1.986577181208049] |
| revenue | 15326000000.0 |
| discount | 8.020101126329143 |
| downside | 77.59764445823618 |
| interest | 93000000.0 |
| leverage | 2.5111148690266516 |
| net_debt | 3617000000.0 |
| terminal | 2 |
| free_cash | 957000000.0 |
| ppe_ratio | 0.398799425812345 |
| buy_hurdle | 22.852161567240156 |
| extra_debt | 0 |
| volatility | 45.70432313448031 |
| basis_notes | [] |
| capex_ratio | 0.037713689155683155 |
| cash_profit | 1247000000.0 |
| share_ratio | Not available |
| annual_years | 5 |
| capital_cost | {'tax': 26.776277157956546, 'beta': 1.1651868036463338, 'debt': 5720000000.0, 'beta_end': '2026-09-11', 'discount': 8.020101126329143, 'debt_cost': 6.46, 'risk_free': 4.96, 'beta_start': '2023-09-22', 'beta_weeks': 156, 'source_url': 'https://home.treasury.gov/resource-center/data-chart-center/interest-rates', 'debt_weight': 43.08584871812491, 'equity_cost': 10.510622678821111, 'equity_value': 7555820646.870001, 'adjusted_beta': 1.1101245357642224, 'credit_spread': 1.5, 'equity_premium': 5.0, 'risk_free_date': '2026-09-11', 'observed_interest': 1.6258741258741258} |
| depreciation | 3.3407281743442514 |
| normal_capex | 3.415034971906246 |
| tax_measured | True |
| current_capex | 3.7713689155683157 |
| working_ratio | 0.0759493670886076 |
| financial_date | 2026-07-31 |
| interest_cover | 9.982753489399025 |
| operating_cash | 1535000000.0 |
| terminal_share | 77.61651536797065 |
| reporting_basis | quarterly |
| uncapped_growth | 1.5393492491328042 |
| projected_margin | 6.05765414664041 |
| capital_inventory | {'date': '2026-07-31', 'values': {'total_current_assets': 5870000000.0, 'short_term_investments': 382000000.0, 'total_current_liabilities': 3221000000.0}, 'version': 'capital-scope-3', 'currency': 'USD', 'evidence': {'total_current_assets': [{'end': '2026-07-31', 'unit': 'USD', 'value': 5870000000.0, 'financial_period_id': 5862725}], 'short_term_investments': [{'end': '2026-07-31', 'unit': 'USD', 'value': 382000000.0, 'financial_period_id': 5862725}], 'total_current_liabilities': [{'end': '2026-07-31', 'unit': 'USD', 'value': 3221000000.0, 'financial_period_id': 5862725}]}, 'conflicts': []} |
| cash_profit_basis | Reported net profit |
| historical_margin | 6.05765414664041 |
| year5_value_share | 77.61651536797065 |
| depreciation_ratio | 0.03340728174344251 |
| net_debt_at_target | 3617000000.0 |
| non_operating_assets | 0 |
| non_operating_profit_material | False |
Recent price · Passed. Weekly close dated 2026-09-11.
Current financials · Passed. Statements through 2026-07-31; factor prices dated 2026-09-11.
Price risk · Passed. Risk uses the latest 52 weekly price changes.
Operating history · Passed. 5 annual results, retaining operating losses and unusually strong years.
Quarterly operating results · Passed. Four quarters through 2026-07-31.
Cash-flow and ownership inputs · Passed. Capital spending, depreciation estimate, operating capital, debt, cash and other ownership claims are recorded.
Depreciation basis · Passed. Four matching quarters of operating income and reported depreciation are required. An unrelated EBITDA-minus-EBIT difference is not treated as depreciation.
Matching currency · Passed. USD statements and share price.
Operating totals · Passed. Quarterly sales and operating profit agree with the trailing snapshot within 5%.
Operating discount rate · Passed. The operating cash-flow discount rate needs a current USD Treasury rate, at least two years of matching market returns, and dated debt and share inputs. An equity return hurdle is not used as the company's funding cost.
Continuing growth and funding cost · Passed. The funding cost must exceed continuing growth in every valuation scenario.
Scenario consistency · Passed. The weaker, central and stronger assumptions must give an ordered range. When growth costs more capital than it earns, a tailored operating review is required before publishing a target.
Target publication review · Passed. The model estimate is within SM's automatic publication range of one quarter to four times the current price. This is a review threshold, not evidence that the market price is correct.
Cash-flow value dependence · Passed. Cash flows beyond year five account for 77.6% of the absolute present value. This is within SM's 90% automatic publication limit.
Investment assets and operating capital · Review needed. Recorded investments are material to equity value but have no reviewed valuation or tax treatment in this operating model. Financial investments must also be excluded from capital needed to fund sales growth.
Policy sm-review-2-research · Model sm-assessment-14-operating-capital · Data bd4ddd6d00b3.