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Western Digital: It's Rare To See A Large-Cap This Undervalued

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  • It's rare to see a large-cap company, such as Western Digital to be this undervalued, especially in the tech industry.
  • The company has strong future growth prospects, a great balance sheet, and strong financials, especially when compared to competitors.
  • Western Digital didn't rally following a recent earnings report. Both revenue and EPS beat, and guidance was strong.
  • Western Digital is also a surprising income play, with a yield of over 2%.

Western Digital (NASDAQ:WDC) a large-cap company that manufactures digital storage devices and is currently trading at up to a 33% discount to a fair value. Recent Q3 earnings did little to boost share value, even though they surprised investors with higher-than-expected revenue and EPS, as well as strong guidance for the coming period. For the long term, the data storage industry is poised for strong growth, driven by the exponentially growing demand for data storage. Yet, share prices are in a dip, down about a quarter from their all-time highs of about $106, which they reached in January. All signs point towards a great company with a currently undervalued share price, and strong future growth. The current dip is only a greater buying opportunity for investors to make an entry into this undervalued large-cap.


ChartWDC 50-Day Exponential Moving Average data by YCharts

Despite volatility, WDC has been on a long-term upwards trend for the past few years, with the 200-Day exponential moving average jumping 226.2% in the past 10 years.

Currently, $78 a share is well out of the range of these averages and soon to hit a bottom, if not there already.

The company is very profitable. For the past 10 years, we've seen steady revenue growth of 136%.

ChartWDC Revenue (Annual) data by YCharts

And, though not pictured on this graph, WDC posted a pretty high EPS of $3.63 in the most recent quarter, which beat estimates by $0.34.

ChartWDC Gross Profit Margin (TTM) data by YCharts

Driving the impressive revenue growth is the company's gross profit margin, which is steadily rising. In the most recent earnings report, WDC said that non-GAAP gross margin grew to 43% (not pictured on chart).

ChartWDC Total Expenses (TTM) data by YCharts

And recently (within the year), WDC has managed to keep expenses

ChartWDC Cash and Equivalents (Quarterly) data by YCharts

ChartSTX PE Ratio (Forward) data by YCharts

ChartSTX Price to Book Value data by YCharts

This article was written by

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WappCap is a stock analysis and research company headed by James LePage (Co-Founder of ShareClub), alongside a team of financial professionals. We write about undervalued, unknown stocks with high return potential. Our articles are meticulously crafted to help you make the decision to invest (or not) in a security, utilizing original analysis, valuation models, and industry experience. Check out our TipRanks analyst rating - we're currently near the top 100 analysts out of over 6,000, and have a return rate of over 30% in 1 year!

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in WDC over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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