IT Hardware Stocks

Western Digital Corporation Quarterly Valuation – April 2015

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Western Digital passes the initial requirements of both the Defensive Investor and the Enterprising Investor. The Defensive Investor’s only concern is the short dividend history, while the Enterprising Investor has no initial concerns. As a result, all value 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, WDC has grown its EPSmg (normalized earnings) from $3.71 in 2011 to an estimated $6.08 for 2015. This is a strong level of demonstrated growth, which is well above the market’s implied estimate for earnings growth of only 3.24% annually over the next 7-10 years. In fact, the historical growth is around 12.83% per year, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still returns an estimate of intrinsic value falling above the current price, indicating the company is undervalued at the present time.

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