What Is Western Digital Corporation's (NASDAQ:WDC) Share Price Doing?

By
Simply Wall St
Published
March 22, 2022
NasdaqGS:WDC
Source: Shutterstock

Western Digital Corporation (NASDAQ:WDC) saw a decent share price growth in the teens level on the NASDAQGS over the last few months. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s take a look at Western Digital’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Western Digital

What is Western Digital worth?

Great news for investors – Western Digital is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Western Digital’s ratio of 7.69x is below its peer average of 17.74x, which indicates the stock is trading at a lower price compared to the Tech industry. What’s more interesting is that, Western Digital’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Western Digital look like?

earnings-and-revenue-growth
NasdaqGS:WDC Earnings and Revenue Growth March 22nd 2022

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Western Digital's earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since WDC is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With a positive profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on WDC for a while, now might be the time to make a leap. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy WDC. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.

If you'd like to know more about Western Digital as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 4 warning signs for Western Digital you should be aware of.

If you are no longer interested in Western Digital, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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