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Western Digital Corporation (NASDAQ:WDC) designs, develops, manufactures and sells hard drives. It sells its products worldwide to original equipment manufacturers (OEMs) and original design manufacturers (ODMs) for use in computer systems, subsystems or consumer electronics (CE) devices, and to distributors, resellers and retailers.

WDC is a great company, but I believe the market has failed to fully acknowledge Western Digital's very strong balance sheet, excellent history of profitability and growth, and strong management.

Here are a few reasons why I'm a big fan of WDC:

Cash covers Total Liabilities

WDC has a very strong balance sheet. It has more than enough liquid assets, particularly cash, to weather any storms that might come its way. Today, Current Assets minus Total Liabilities accounts for over 29% of WDC's market value!

Shareholders' equity has grown by 67,171.43% over the past 10 years, with a median annual growth rate of 57.90%.

Management's job is to deliver value for shareholders and that's exactly what Western Digital's management have done. Over the past 10 years, they've grown the business by a median annual growth rate of 34.34%, according to its free cash flow, and chose to reinvest that money into the business' assets rather than squandering it. That brings me to my next point.

For every $100 spent, WDC is generating $126.23 of cash

When I buy a stock, I like to think I'm providing capital to that company, so I want to make sure that it's being used well. This is my proof. Western Digital is producing a 26.23% cash return on invested capital.

WDC is significantly undervalued from a growth perspective

The Vuru Engine determines a stock's growth price based on the company's ability to grow free cash flow in the future. WDC is undervalued by 169.16% according to our growth approach.

The Showdown

  • Wall Street's Target Price: $32.00
  • Vuru's Growth Price: $82.47
  • Current Price: $30.64

Verdict

Western Digital is a great company. It has fantastic management, a very strong balance sheet and history of delivering shareholder value. With these aspects, WDC will continue to succeed in the future.

Wall Street is wrong!

NOTE: Please read our disclaimer.

Disclosure: No positions

Source: Wall Street's Not Acknowledging Western Digital's Potential