If you’re just looking at raw percentage gains since the AI mania began, Super Micro Computer (NASDAQ:SMCI) would probably qualify for the top spot of which stock popped the most–before it crashed.

This stock has been riddled with a boatload of problems and is down 77% from its March peak–39% in the past month alone. SMCI stock now trades at just 13 times trailing earnings. This low earnings multiple suggests either of the following: the market is punishing Super Micro Computer more than it should or the books are cooked more than we can imagine.

To draw conclusions here, let’s take a deeper look into the drama behind the stock and what could happen going forward. I’m going to assume you know nothing about this business, so let’s understand what it is.

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What Does Super Micro Computer Do?

Super Micro Computer describes itself in its recent 10-Q report as “…a Silicon Valley-based provider of accelerated compute platforms that are comprised of application-optimized high performance and high-efficiency server and storage systems for a variety of markets, including enterprise data centers, cloud computing, artificial intelligence (“AI”), 5G and edge computing. Our Total IT Solutions include complete servers, storage systems, modular blade servers, blades, workstations, full rack scale solutions, networking devices, server sub-systems, server management and security software. We also provide global support and services to help our customers install, upgrade and maintain their computing infrastructure.”

In simple terms, sell servers for cloud computing and AI models. This makes them–or at least you’d think as such–a very good bet on AI. That’s exactly why this stock rallied so much and analysts were so optimistic about where it was heading. The breadth of this company’s products across so many high-growth areas made it the perfect AI bet in some sense:

So, why didn’t this bet pay off in recent months?

The Rise and (Recent) Fall of Super Micro Computer

The product suite here really made it a natural beneficiary of the AI boom. AI computing power was–and still is–surging. It only made sense that companies that are providing the hardware for these power-hungry large language models were about to post triple-digit growth figures and nosebleed valuations.

The stock rose ~4,630% from the end of 2019 to its peak.

However, cracks began to appear in August when short-seller Hindenburg Research published a report alleging accounting irregularities at Super Micro. The company then delayed filing its annual 10-K report. You don’t really do this unless something is really wrong–and something was wrong.

While management downplayed the issues–stating they did not expect significant restatements–the scrutiny was too much to not have an impact.

In late September, The Wall Street Journal reported that the Justice Department had launched a probe into Super Micro following the Hindenburg report allegations. This news caused Super Micro shares to fall 12% in a single trading session.

The real bombshell dropped on October 30th when Super Micro disclosed that its auditor Ernst & Young (EY) had resigned. EY said it could no longer rely on management’s representations. SMCI stock plunged 30% on that news and analysts began pulling back price targets significantly. SMCI stock now trades at $26 as of writing.

Should You Catch This Falling Knife?

As I’ve noted before: this stock trades at just 13 times trailing earnings. It’s a data center company with huge potential, and any AI stock trading at such a low amount should warrant a closer look.

And what do you do when you want to take a closer look? The vast majority of analysts would look at the company’s income statement and balance sheet, along with whatever supplementary information it has to make a judgment about whether or not they think the price is undervalued or overvalued.

However, the Hindenburg report and the auditor’s resignation puts all previous reports from Super Micro Computer into question. One could waggle around its earnings figures and projections to show you it’s trading so low, but when you look at what has happened, how confident can you really be about those earnings figures?

It’s not just earnings figures that are hanging in the balance. The fact that Super Micro Computer has been delaying its 10-K for this long suggests that books may have been cooked enough to burn other parts of the income statement and maybe even the balance sheet. As a result, things are very murky here. The history behind SMCI makes it pretty fishy.

Regardless, I still think Super Micro Computer is worth looking into. The books can only be cooked so much–if they are cooked in the first place–so, even if we discount 20% off its earnings for potential financial statement manipulation, SMCI stock is still going for a fire sale compared to other AI companies.

So before you make a decision, let’s get a basic overview of Super Micro’s financials.

Here are some things to keep in mind beyond those figures:

If I were forced to take management’s figures as is–without assuming significant manipulation or delisting–I would say SMCI stock is a falling knife that could be worth catching if you are someone who’s okay with losing a good portion of that investment if things don’t turn out as expected.

SMCI’s Financial Expectations

I believe it is a good idea to look into a range of expectations going forward to have a broader idea of where this train is heading. The company’s management is obviously going to give you some very rosy figures going forward, but let’s look into what analysts think.

At the midpoint of these projections, you’re paying 7.7 times forward earnings for next year, and 5.8 times earnings for FY2026’s earnings. You’re also paying 0.55 times forward sales, and 0.47 times FY2026 sales.

The median forward PE ratio among 851 hardware companies is 16.25 times. The forward PS ratio of 0.55 is also much lower than the company’s broader industry average. SMCI stock will look even cheaper if you compare it to some high-caliber AI companies.

But again, take everything with a spoonful of salt, because there’s a decent possibility that the earnings figures we’re dealing with are not accurate. If that turns out to be true, estimates will be revised down substantially.

The Beneish M-Score is a mathematical model that we can use to try and identify if a company manipulated its earnings. Here’s how SMCI performs:

Of course, The Beneish M-Score isn’t foolproof, but it’s something to keep in mind if you’re putting money into SMCI.

The Bottom Line

My take is that if you are chasing high-risk, high-reward AI bets, buying SMCI could end up being worth it. The premium you’re paying is much lower than other AI companies, so there’s a clear argument that the negatives here have been priced in.

However, I would not buy SMCI if you are a value investor or if you are uncomfortable with losing over 50% of your money.

I’m relying heavily on analyst estimates, but my doomsday scenario is what I believe could be the floor if everything that could go wrong, does go wrong. A bad recession could drag it down even lower.

$13 may be hard to swallow for some bulls–even if it’s the worst price target–but you should consider that very few would’ve thought that its current price of $26 would’ve been possible if they were asked just a few months back.

With all that in mind, I think whether or not SMCI is a buy relies entirely on how much risk you’re okay with taking. I would give SMCI stock a “speculative buy” rating at best due to the huge amount of uncertainty. If you can’t afford to take big hits–a retiree, for example–I would not touch this stock with a ten-foot pole.

There are better AI bets out there; often safer–with higher upside potential.

While we acknowledge the potential of SMCI as an AI play, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.