Applied Digital (APLD): fair value

Fair-value band

The normal range for this name runs from $-27 (cheap) to $110 (expensive); it is now priced at $17.

That is 0.5σ below this name's own normal premium.

Standing premium not backed by fundamentals: nothing in this company's health score has changed to earn the rating the market normally gives it.

Is Applied Digital undervalued?

Fair, relative to its own history. Applied Digital trades at $17, 27% above the fair value this model estimates, but it has habitually traded 213% above fair value, and today's gap is 0.5σ below that norm, within the range it normally trades in, so the verdict is Fair: priced normally for itself, not necessarily fairly valued. The health score behind that pricing hasn't moved to earn it, though: read Fair here as “priced the way this name normally is”, not as a claim the price is justified.

Diligence checklist

2 pass · 3 fail · 6 no data

• N/ACash actually collected from profit, median of the last 3 years: n/aXBRL · Applied Digital lost money in every quarter of the window. Dividing cash flow by a loss says nothing about earnings quality, so I'm leaving this one unscored rather than printing a ratio that reads like an answer.
• FAILGap between paper profit and real cash: -9.2%XBRL · Applied Digital collected more cash than it booked as profit, by 9.2% of everything it owns. That is the conservative direction, but it is far enough past my 5% line to flag: a gap this wide usually means something large and non-cash is running through the earnings, and I want to know what it is before I trust the profit figure.
• N/ADebt compared to one year of cash earnings: n/aXBRL · Applied Digital's earnings before interest, tax and depreciation are negative or can't be worked out over the window, so this ratio has nothing to divide by. A negative figure there is a finding in its own right: read it off the return-on-capital line above rather than as a clean bill of health on debt.
• FAILHow much more it earns on capital than that capital costs: -7.83ppXBRL (dealbreaker) · Applied Digital earns 7.8 points LESS on the capital it employs than that capital costs. Every dollar reinvested here destroys value instead of creating it, which turns growth into a reason to worry rather than a reason to own the business. It has been below its cost of capital for 18 straight quarters, which is 4.5 years. That is capital destruction rather than a cheap stock, and it is where I stop work. The gap is wider than it was at the start of the window.
• PASSStock sold by executives and directors on the open market, last 6 months: $3.0MEDGAR · Insiders at Applied Digital sold $3.0M of stock on the open market in the last 6 months, which is inside the $5 million line I draw. Selling that size is ordinary diversification rather than a signal about the business. The sellers: Nottenburg Richard N $3.0M. Options being exercised, and shares held back to cover the tax on them, are not sales and I don't count them either. filing ↗
• N/AHow long the CEO has run this company: n/aTEXT · I couldn't establish when Applied Digital's current chief executive took the job: no appointment appears in the 8-K item 5.02 history.
• N/AProfit margin held up during the last sales slump: n/aXBRL · There's no revenue downturn in Applied Digital's filed record, or gross profit isn't tagged, so this test has nothing to measure. It needs a bad patch to look at: without one, whether customers would stay through a price rise is untested rather than proven.
• N/ANormal profit margin across a full business cycle: n/aXBRL · There is no valuation for Applied Digital, so there is no normal margin to test the current one against.
• N/AHow much of the stock trades on an average day: $524MMARKET · Applied Digital trades about $524M of stock a day. Taking a fifth of that for ten sessions, I could build or exit roughly $1,049M without leaning on the price. There's no pass or fail here because the answer depends on how big a position I'd actually want to take.
• FAILShare of revenue from its single biggest customer: 59%TEXT (dealbreaker) · Applied Digital's July 29, 2026 10-K names a single customer at 59% of revenue, in its own words: "HPC Hosting Business During fiscal year 2026, this business segment was comprised of one customer accounting for 59% of our total revenue from continuing operations". More than a quarter of the top line riding on one buyer is a dealbreaker for me. No discount to fair value survives that customer deciding to leave, and the decision isn't Applied Digital's to make. filing ↗
• PASSWhether the company switched auditors in the last 2 years: yes, 2025-06-20, reason disclosedTEXT · Applied Digital changed auditors on June 20, 2025, and the filing says why: "CBIZ CPAs P.C. ("CBIZ CPAs") acquired the attest business of Marcum LLP ("Marcum"), effective November 1, 2024. As a result of this transaction, on June 18, 2025, Marcum resigned as the independent registered public accounting firm of Applied Digital Corporation (the "Company") and, with the approval of the Audit Committee of the Company's Board of Directors, CBIZ CPAs was engaged as the Company's independent registered public accounting firm for the year ended May 31, 2025". It also states there were no disagreements with the outgoing firm, and the one reportable event it lists is a material weakness the company had already disclosed in an annual report. I stop work on an auditor change only when no reason is given, because that is the switch that can come right before something bad is uncovered. This one has a stated cause, so it passes. filing ↗