IT Hardware Stocks

Western Digital Corporation Quarterly Valuation – January 2015 $WDC

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Western Digital does fairly well in the ModernGraham model, and is suitable for Enterprising Investors. The Defensive Investor is concerned with the short dividend history and the high PB ratio, while the Enterprising Investor has no initial concerns. As a result, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $3.71 in 2011 to an estimated $6.26 for 2015. This is a strong level of demonstrated growth which is well above the market’s implied estimate of 4.59% annual earnings growth over the next 7-10 years. Here, the historical growth in EPSmg over the last five years is around 13.8% per year. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur. A significant slowdown would have to occur to justify a price as low as the market is demonstrating. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.

Be sure to check out previous ModernGraham valuations of Western Digital Corporation (WDC) for greater perspective!

Read the full valuation on Seeking Alpha!

WDC Chart

WDC data by YCharts

Disclaimer:  The author did not hold a position in Western Digital Corporation (WDC) at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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