Does Seagate’s Recent 212.7% Surge Signal Opportunity After New Data Storage Partnerships?

• Wondering if Seagate Technology Holdings is a bargain or overpriced? Let's dig in and see what the numbers are really saying.
• If you paid attention to the stock's moves lately, you'll know it climbed 3.1% in the last week and 212.7% year-to-date, with a 180.0% gain over the past twelve months alone.
• Notably, these moves follow positive analyst sentiment and the company's involvement in new data storage partnerships that have made waves across the tech industry. Industry observers are also highlighting recent advances in AI and cloud infrastructure as supportive backdrops for Seagate's momentum.
• As for value, Seagate scores 3 out of 6 on our valuation checklist, suggesting it is undervalued in half the major areas we track. We will break down those approaches in a moment and keep an eye out for a smarter way to make sense of fair value before we wrap up.

Seagate Technology Holdings delivered 180.0% returns over the last year. See how this stacks up to the rest of the Tech industry.

Approach 1: Seagate Technology Holdings Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates what a company is really worth today by forecasting its future cash flows and discounting them back to present value. This method is commonly used to reveal whether a company's current market price is justified based on its future ability to generate cash.

Seagate Technology Holdings recently reported annual Free Cash Flow of approximately $1.19 Billion. Analyst forecasts suggest this figure could grow significantly, with cash flows projected to reach about $3.85 Billion by 2030. It is important to note that initial projections are based on direct analyst estimates for the next five years. Further into the future, Simply Wall St extrapolates the trend. These cash flow forecasts are all denoted in USD ($).

The DCF model used here, specifically a 2 Stage Free Cash Flow to Equity approach, calculates Seagate's intrinsic value at $356.98 per share. Based on this, the stock is currently trading at a 24.3% discount, which suggests Seagate may be undervalued relative to its projected future cash generation.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Seagate Technology Holdings is undervalued by 24.3%. Track this in your watchlist or portfolio, or discover 927 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Seagate Technology Holdings.

Approach 2: Seagate Technology Holdings Price vs Earnings

The Price-to-Earnings (PE) ratio is widely used for valuing profitable technology companies like Seagate Technology Holdings, as it directly links a company’s share price to its bottom-line earnings. This makes it a straightforward way to see how much investors are willing to pay for each dollar of profit. The PE ratio reflects both the market's growth expectations and its appetite for risk. Generally, companies with higher earnings growth prospects or lower perceived risk command higher PE ratios, while those facing challenges or risks trade at lower multiples.

Seagate currently trades at a PE of 34.4x, which is notably above the tech industry average of 22.5x and higher than its peer average of 18.2x. At first glance, this suggests the stock is priced at a premium compared to others in its field. However, the key question is whether that premium is justified by Seagate’s growth profile, profitability, and risk factors.

This is where Simply Wall St's proprietary "Fair Ratio" comes in. The Fair Ratio goes beyond simple industry and peer comparisons by factoring in the company’s long-term earnings growth outlook, profit margins, market capitalization, industry positioning and specific risk factors. For Seagate, the Fair Ratio is calculated to be 35.9x, just slightly above its current PE.

Since Seagate’s PE ratio is nearly identical to its Fair Ratio, this suggests the stock is trading at close to its fair value based on these broader fundamentals, rather than being notably over- or undervalued.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1442 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Seagate Technology Holdings Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is an easy-to-use tool that lets investors link their personal story and perspective about a company, like Seagate Technology Holdings, to their assumptions for its future revenue, earnings, margins, and fair value. Available right on Simply Wall St's Community page, Narratives empower you to move beyond static numbers by connecting the latest news, analysis, and forecasts to your investment thesis.

Instead of relying solely on models or ratios, you can build or choose a Narrative that summarizes exactly why you believe Seagate is poised for durable upside or, conversely, faces significant headwinds. Narratives help you decide when to buy or sell by actively comparing your estimated Fair Value with the current market Price, updating automatically when new earnings or news emerge. This makes them dynamic, actionable, and highly personal, supported by a community of millions.

For example, some investors believe in a bullish scenario for Seagate, forecasting continued revenue growth and setting price targets as high as $200 per share, while others take a more cautious view, projecting as low as $80 per share. With Narratives, you can find, create, and compare these perspectives in real time, making more informed and confident investment decisions.

Do you think there's more to the story for Seagate Technology Holdings? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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