Western Digital Corp (NASDAQ: WDC)

Sector: Technology Industry: Computer Hardware CIK: 0000106040
Market Cap 60.34 Bn
P/B 10.25
P/E 23.73
P/S 5.03
ROIC (Qtr) 25.51
Div Yield % 0.19
Rev 1y % (Qtr) 27.40
Total Debt (Qtr) 4.68 Bn
Debt/Equity (Qtr) 0.80

About

Western Digital Corporation, commonly known as Western Digital, operates in the data storage industry, offering a range of products based on both NAND flash and hard disk drive (HDD) technologies. The company's primary business activities involve the development, manufacturing, and provision of data storage devices and solutions. Western Digital's operations span across various countries, with a significant presence in the Cloud, Client, and Consumer end markets. The company's revenue is generated through the sale of flash-based storage solutions,...

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Price action

Investment thesis

Bull case

  • Strong operating cash flow of 2.33B provides robust 0.50x coverage of total debt 4.68B, indicating excellent debt servicing capability and financial flexibility.
  • Strong operating cash flow of 2.33B provides 3.83x coverage of SG&A expenses 608M, showing efficient operational cost management.
  • Robust free cash flow of 1.94B exceeds capital expenditure of 385M by 5.05x, indicating strong organic growth funding capability.
  • Robust tangible asset base of 10.04B provides 9.11x coverage of working capital 1.10B, indicating strong operational backing.
  • Tangible assets of 10.04B provide robust 7.10x coverage of other current liabilities 1.41B, indicating strong asset backing.

Bear case

  • Operating cash flow of 2.33B provides thin coverage of dividend payments of (78M) with a -29.86 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Investment activities of 138M provide weak support for R&D spending of 1.30B, which is 0.11x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Operating cash flow of 2.33B provides minimal -7.74x coverage of tax expenses of (301M), suggesting potential tax planning inefficiencies or unsustainable tax positions.
  • Free cash flow of 1.94B represents just -194.40x of debt issuance (10M), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • Operating cash flow of 2.33B barely covers operating expenses of (160M) with a -14.56 ratio, suggesting thin operational efficiency margins and limited flexibility.

Peer comparison

Companies in the Computer Hardware
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 ANET Arista Networks, Inc. 164.72 Bn 49.07 19.50 0.00 Bn
2 DELL Dell Technologies Inc. 86.37 Bn 16.20 0.83 31.24 Bn
3 WDC Western Digital Corp 60.34 Bn 23.73 5.03 4.68 Bn
4 STX Seagate Technology Holdings plc 58.67 Bn 34.25 6.14 4.99 Bn
5 SNDK Sandisk Corp 34.41 Bn -19.78 4.42 1.35 Bn
6 PSTG Pure Storage, Inc. 21.84 Bn 167.52 6.27 0.23 Bn
7 HPQ Hp Inc 21.10 Bn 8.34 0.38 9.67 Bn
8 SMCI Super Micro Computer, Inc. 17.45 Bn 22.01 0.83 4.78 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 4.38 2.06
EV to Cash from Ops. EV/CFO 27.02 -0.65
EV to Debt EV to Debt 13.44 56.37
EV to EBIT EV/EBIT 24.22 2.89
EV to EBITDA EV/EBITDA 18.65 -1.74
EV to Free Cash Flow [EV/FCF] EV/FCF 32.38 -7.44
EV to Market Cap EV to Market Cap 1.04 7.64
EV to Revenue EV/Rev 5.24 78.30
Price to Book Value [P/B] P/B 10.25 -28.73
Price to Earnings [P/E] P/E 23.73 6.39
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 21.92 1.25
Dividend Payout Ratio % Div Payout % (Qtr) 2.80 12.30
Dividend per Basic Share Div per Share (Qtr) 0.20 0.27
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 3.55 7.93
Interest Coverage Int. cover (Qtr) 8.15 -105.42
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 15.57 -11.38
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 20.12 867.36
Dividend Growth (1y) % Div 1y % (Qtr) 0.00 4.71
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 345.91 -189.41
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 394.14 -40.76
EBIT Growth (1y) % EBIT 1y % (Qtr) 171.86 -117.00
EBT Growth (1y) % EBT 1y % (Qtr) 323.01 -116.68
EPS Growth (1y) % EPS 1y % (Qtr) 680.65 -70.06
FCF Growth (1y) % FCF 1y % (Qtr) 2,260.00 712.64
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 87.83 34.90
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.84 0.80
Cash Payout Ratio Cash Payout (Qtr) 0.03 0.06
Cash Ratio Cash Ratio (Qtr) 0.40 7.26
Current Ratio Curr Ratio (Qtr) 1.21 13.59
Debt to Equity Ratio Debt/Equity (Qtr) 0.80 -3.57
Interest Cover Ratio Int Coverage (Qtr) 8.15 -105.42
Times Interest Earned Times Interest Earned (Qtr) 8.15 -105.42
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 25.00 -629.92
EBIT Margin % EBIT Margin % (Qtr) 21.65 -683.67
EBT Margin % EBT Margin % (Qtr) 19.00 -687.58
Gross Margin % Gross Margin % (Qtr) 39.30 34.79
Net Profit Margin % Net Margin % (Qtr) 21.20 -692.43