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Is Western Digital (WDC) a Great Stock for Value Investors?
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Western Digital Corporation (WDC - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Western Digital has a trailing twelve months PE ratio of 6.9, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.0. If we focus on the long-term PE trend, Western Digital’s current PE level puts it below its midpoint over the past five years. Moreover, the current level is fairly below the highs for this stock, suggesting it might be a good entry point.
Further, the stock’s PE also compares favorably with the industry’s trailing twelve months PE ratio, which stands at 11.8. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Western Digital has a forward PE ratio (price relative to this year’s earnings) of just 6.0, so it is fair to say that a slightly more value-oriented path may be ahead for Western Digital stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Western Digital has a P/S ratio of about 1.3. This is lower than the S&P 500 average, which comes in at 3.3 right now. Also, as we can see in the chart below, this is below the highs for this stock in particular over the past few years.
As we can see, the stock is trading at its median value for the time period from a P/S metric. This does not provide us with a conclusive direction as to the relative valuation of the stock in comparison to its historical trend.
Broad Value Outlook
In aggregate, Western Digital currently has a Zacks Value Style Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Western Digital a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Western Digital is just 0.3, a level that is far lower than the industry average of 1.3. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 5.4, which is far better than the industry average of 16.3. Clearly, WDC is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Western Digital might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of A and a Momentum score of D. This gives WDC a Zacks VGM score—or its overarching fundamental grade—of A. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been quite encouraging. The current fiscal quarter has seen five estimates go higher in the past sixty days compared to only one lower, while the fiscal full year estimate has seen eight upward and zero downward revisions in the same time period.
This has had a meaningful impact on the consensus estimate as the current fiscal quarter consensus estimate has risen by 10% in the past two months, while the fiscal full year estimate has increased 4.9%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This bullish trend is why the stock boasts a Zacks Rank #1 (Strong Buy) and why we are expecting outperformance from the company in the near term.
Bottom Line
Western Digital is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Boasting a good industry rank (among the top 3%) and a top Zacks Rank, the company deserves attention right now. In fact, over the past two years, the industry has clearly outperformed the broader market, as you can see below:
So, it might pay for value investors to delve deeper into the company’s prospects, as fundamentals indicate that this stock could be a compelling pick.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Image: Bigstock
Is Western Digital (WDC) a Great Stock for Value Investors?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Western Digital Corporation (WDC - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Western Digital has a trailing twelve months PE ratio of 6.9, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.0. If we focus on the long-term PE trend, Western Digital’s current PE level puts it below its midpoint over the past five years. Moreover, the current level is fairly below the highs for this stock, suggesting it might be a good entry point.
Further, the stock’s PE also compares favorably with the industry’s trailing twelve months PE ratio, which stands at 11.8. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Western Digital has a forward PE ratio (price relative to this year’s earnings) of just 6.0, so it is fair to say that a slightly more value-oriented path may be ahead for Western Digital stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Western Digital has a P/S ratio of about 1.3. This is lower than the S&P 500 average, which comes in at 3.3 right now. Also, as we can see in the chart below, this is below the highs for this stock in particular over the past few years.
As we can see, the stock is trading at its median value for the time period from a P/S metric. This does not provide us with a conclusive direction as to the relative valuation of the stock in comparison to its historical trend.
Broad Value Outlook
In aggregate, Western Digital currently has a Zacks Value Style Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Western Digital a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Western Digital is just 0.3, a level that is far lower than the industry average of 1.3. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 5.4, which is far better than the industry average of 16.3. Clearly, WDC is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Western Digital might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of A and a Momentum score of D. This gives WDC a Zacks VGM score—or its overarching fundamental grade—of A. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been quite encouraging. The current fiscal quarter has seen five estimates go higher in the past sixty days compared to only one lower, while the fiscal full year estimate has seen eight upward and zero downward revisions in the same time period.
This has had a meaningful impact on the consensus estimate as the current fiscal quarter consensus estimate has risen by 10% in the past two months, while the fiscal full year estimate has increased 4.9%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Western Digital Corporation Price and Consensus
Western Digital Corporation Price and Consensus | Western Digital Corporation Quote
This bullish trend is why the stock boasts a Zacks Rank #1 (Strong Buy) and why we are expecting outperformance from the company in the near term.
Bottom Line
Western Digital is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Boasting a good industry rank (among the top 3%) and a top Zacks Rank, the company deserves attention right now. In fact, over the past two years, the industry has clearly outperformed the broader market, as you can see below:
So, it might pay for value investors to delve deeper into the company’s prospects, as fundamentals indicate that this stock could be a compelling pick.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>