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Why Western Digital (WDC) Is Still A Strong Growth Stock

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Now that third-quarter earnings season is all but over, a lot of the investment world’s attention begins to shift towards the holiday quarter. With that said, growth-minded investors are likely still on the hunt for new stocks and the tech sector is a great place to start.

The likes of Netflix (NFLX - Free Report) , Facebook , and Amazon (AMZN - Free Report) rightfully garner a lot of attention as their rapid growth has helped spur the rise of technology stocks. But even the most causal of readers know about these giants.

For investors looking to find growth in the tech sector outside of putting their money in the biggest names, Western Digital Corporation (WDC - Free Report) could be a good place to start.

The U.S. tech company manufactures and sells data storage devices and hard drives. The memory and computer storage industry that Western Digital operates in is only set to grow as the amount of data companies and people use grows exponentially.

Now, let’s look at what makes Western Digital a great growth stock.

Growth Fundamentals

Western Digital, which develops and manufactures data storage devices for both personal and corporate use is currently a Zacks Rank #1 (Strong Buy) and sports an “A” grade for Growth in our Style Scores system.

The company was in the news on Monday after its stock price fell nearly 7%. The movement came after Morgan Stanley (MS - Free Report) lowered its Western Digital rating from overweight to equal weight. Morgan Stanley’s downgrade also included other computer memory and NAND flash memory firms and cited future prices as a reason for the downgrade.

Before today’s decline, shares of Western Digital had soared 36.54% in 2017. What’s more, the company has already fought its way back from a major 2015 downturn. And based on our current Zacks Consensus Estimates, Western Digital’s revenues and earnings are set to jump.

Western Digital’s revenues are projected to surge 7.58% in the second quarter of its fiscal 2018 to reach as high as $5.28 billion. On top of that, the company’s full-year revenues are expected to pop nearly 7% to $20.40 billion.

The data storage company, which boasts big brands such as SanDisk under its umbrella, is expected to see itsQ2 2018 earnings skyrocket 58.32%. For its full fiscal year, Western Digital’s earnings are set to hit $13.17 per share, which would mark a 43.30% year-over-year gain.

In terms of growth, Western Digital’s current cash flow rests at 96%, which crushed the “Computer – Storage Devices” industry’s 2.79% average decline. On top of that, the company’s historic cash flow—the last 3-5 years, annualized—sits at 11.68%, beating its industry’s average, and helps to show that the company has been growing its cash position in recent years.

Western Digital Corporation Price, Consensus and EPS Surprise

Western Digital Corporation Price, Consensus and EPS Surprise | Western Digital Corporation Quote

For investors skeptical that Western Digital will be able to match or beat our current consensus estimates for revenue and earnings, the company has met or topped out estimates in seven of the last eight quarters. 

Lastly, for investors concerned that Western Digital might only be a growth play, the company also currently rocks an “A” grade for Value in our Style Scores system, helping it earn an overall “A” VGM score. Western Digital is currently trading at just 7.06x earnings, which marks a 50% discount compared to its industry’s average.

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