Intrinsic value of Seagate Technology PLC - STX

Previous Close

$47.62

  Intrinsic Value

$43.16

stock screener

  Rating & Target

hold

-9%

Previous close

$47.62

 
Intrinsic value

$43.16

 
Up/down potential

-9%

 
Rating

hold

We calculate the intrinsic value of STX stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 13.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  11,408
  11,670
  11,970
  12,307
  12,680
  13,089
  13,535
  14,017
  14,537
  15,095
  15,692
  16,329
  17,007
  17,728
  18,492
  19,303
  20,161
  21,068
  22,026
  23,038
  24,106
  25,233
  26,420
  27,670
  28,988
  30,375
  31,834
  33,371
  34,987
  36,687
Variable operating expenses, $m
  10,287
  10,520
  10,787
  11,086
  11,418
  11,782
  12,179
  12,608
  13,070
  13,566
  13,954
  14,521
  15,124
  15,765
  16,445
  17,165
  17,928
  18,735
  19,587
  20,487
  21,437
  22,438
  23,494
  24,606
  25,777
  27,011
  28,309
  29,675
  31,112
  32,624
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  10,287
  10,520
  10,787
  11,086
  11,418
  11,782
  12,179
  12,608
  13,070
  13,566
  13,954
  14,521
  15,124
  15,765
  16,445
  17,165
  17,928
  18,735
  19,587
  20,487
  21,437
  22,438
  23,494
  24,606
  25,777
  27,011
  28,309
  29,675
  31,112
  32,624
Operating income, $m
  1,121
  1,150
  1,183
  1,220
  1,262
  1,307
  1,356
  1,410
  1,467
  1,529
  1,738
  1,808
  1,883
  1,963
  2,048
  2,138
  2,233
  2,333
  2,439
  2,551
  2,670
  2,794
  2,926
  3,064
  3,210
  3,364
  3,525
  3,696
  3,874
  4,063
EBITDA, $m
  1,740
  1,780
  1,826
  1,878
  1,934
  1,997
  2,065
  2,139
  2,218
  2,303
  2,394
  2,491
  2,595
  2,705
  2,821
  2,945
  3,076
  3,214
  3,360
  3,515
  3,678
  3,849
  4,031
  4,221
  4,422
  4,634
  4,857
  5,091
  5,338
  5,597
Interest expense (income), $m
  172
  260
  268
  278
  289
  302
  316
  331
  348
  366
  385
  406
  429
  452
  478
  505
  533
  563
  596
  629
  665
  703
  743
  785
  829
  876
  925
  977
  1,032
  1,089
  1,150
Earnings before tax, $m
  861
  881
  905
  931
  960
  991
  1,025
  1,062
  1,101
  1,144
  1,332
  1,380
  1,431
  1,486
  1,543
  1,604
  1,669
  1,738
  1,810
  1,886
  1,966
  2,051
  2,141
  2,235
  2,334
  2,438
  2,548
  2,664
  2,785
  2,913
Tax expense, $m
  232
  238
  244
  251
  259
  268
  277
  287
  297
  309
  360
  373
  386
  401
  417
  433
  451
  469
  489
  509
  531
  554
  578
  603
  630
  658
  688
  719
  752
  787
Net income, $m
  628
  643
  661
  680
  701
  723
  748
  775
  804
  835
  972
  1,007
  1,045
  1,084
  1,127
  1,171
  1,218
  1,268
  1,321
  1,377
  1,436
  1,497
  1,563
  1,631
  1,704
  1,780
  1,860
  1,944
  2,033
  2,127

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  9,594
  9,815
  10,067
  10,350
  10,664
  11,009
  11,383
  11,789
  12,227
  12,696
  13,198
  13,733
  14,304
  14,910
  15,553
  16,235
  16,956
  17,719
  18,525
  19,376
  20,274
  21,222
  22,220
  23,272
  24,380
  25,546
  26,774
  28,066
  29,425
  30,855
Adjusted assets (=assets-cash), $m
  9,594
  9,815
  10,067
  10,350
  10,664
  11,009
  11,383
  11,789
  12,227
  12,696
  13,198
  13,733
  14,304
  14,910
  15,553
  16,235
  16,956
  17,719
  18,525
  19,376
  20,274
  21,222
  22,220
  23,272
  24,380
  25,546
  26,774
  28,066
  29,425
  30,855
Revenue / Adjusted assets
  1.189
  1.189
  1.189
  1.189
  1.189
  1.189
  1.189
  1.189
  1.189
  1.189
  1.189
  1.189
  1.189
  1.189
  1.189
  1.189
  1.189
  1.189
  1.189
  1.189
  1.189
  1.189
  1.189
  1.189
  1.189
  1.189
  1.189
  1.189
  1.189
  1.189
Average production assets, $m
  2,624
  2,684
  2,753
  2,831
  2,916
  3,011
  3,113
  3,224
  3,344
  3,472
  3,609
  3,756
  3,912
  4,077
  4,253
  4,440
  4,637
  4,846
  5,066
  5,299
  5,544
  5,803
  6,077
  6,364
  6,667
  6,986
  7,322
  7,675
  8,047
  8,438
Working capital, $m
  -240
  -245
  -251
  -258
  -266
  -275
  -284
  -294
  -305
  -317
  -330
  -343
  -357
  -372
  -388
  -405
  -423
  -442
  -463
  -484
  -506
  -530
  -555
  -581
  -609
  -638
  -669
  -701
  -735
  -770
Total debt, $m
  4,970
  5,152
  5,359
  5,592
  5,851
  6,134
  6,443
  6,777
  7,136
  7,523
  7,936
  8,377
  8,846
  9,345
  9,874
  10,435
  11,029
  11,657
  12,320
  13,021
  13,760
  14,539
  15,361
  16,227
  17,139
  18,099
  19,109
  20,172
  21,291
  22,468
Total liabilities, $m
  7,896
  8,078
  8,285
  8,518
  8,777
  9,060
  9,369
  9,703
  10,062
  10,449
  10,862
  11,303
  11,772
  12,271
  12,800
  13,361
  13,955
  14,583
  15,246
  15,947
  16,686
  17,465
  18,287
  19,153
  20,065
  21,025
  22,035
  23,098
  24,217
  25,394
Total equity, $m
  1,698
  1,737
  1,782
  1,832
  1,888
  1,949
  2,015
  2,087
  2,164
  2,247
  2,336
  2,431
  2,532
  2,639
  2,753
  2,874
  3,001
  3,136
  3,279
  3,430
  3,589
  3,756
  3,933
  4,119
  4,315
  4,522
  4,739
  4,968
  5,208
  5,461
Total liabilities and equity, $m
  9,594
  9,815
  10,067
  10,350
  10,665
  11,009
  11,384
  11,790
  12,226
  12,696
  13,198
  13,734
  14,304
  14,910
  15,553
  16,235
  16,956
  17,719
  18,525
  19,377
  20,275
  21,221
  22,220
  23,272
  24,380
  25,547
  26,774
  28,066
  29,425
  30,855
Debt-to-equity ratio
  2.930
  2.970
  3.010
  3.050
  3.100
  3.150
  3.200
  3.250
  3.300
  3.350
  3.400
  3.450
  3.490
  3.540
  3.590
  3.630
  3.670
  3.720
  3.760
  3.800
  3.830
  3.870
  3.910
  3.940
  3.970
  4.000
  4.030
  4.060
  4.090
  4.110
Adjusted equity ratio
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  628
  643
  661
  680
  701
  723
  748
  775
  804
  835
  972
  1,007
  1,045
  1,084
  1,127
  1,171
  1,218
  1,268
  1,321
  1,377
  1,436
  1,497
  1,563
  1,631
  1,704
  1,780
  1,860
  1,944
  2,033
  2,127
Depreciation, amort., depletion, $m
  620
  631
  643
  657
  673
  690
  709
  729
  750
  774
  656
  683
  711
  741
  773
  807
  843
  881
  921
  963
  1,008
  1,055
  1,105
  1,157
  1,212
  1,270
  1,331
  1,395
  1,463
  1,534
Funds from operations, $m
  1,248
  1,274
  1,304
  1,337
  1,373
  1,413
  1,457
  1,504
  1,554
  1,609
  1,628
  1,690
  1,756
  1,826
  1,900
  1,978
  2,062
  2,149
  2,242
  2,340
  2,444
  2,553
  2,667
  2,788
  2,916
  3,050
  3,191
  3,340
  3,496
  3,661
Change in working capital, $m
  -5
  -6
  -6
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
Cash from operations, $m
  1,252
  1,280
  1,310
  1,344
  1,381
  1,422
  1,466
  1,514
  1,565
  1,620
  1,641
  1,703
  1,770
  1,841
  1,916
  1,995
  2,080
  2,168
  2,262
  2,361
  2,466
  2,576
  2,692
  2,815
  2,944
  3,079
  3,222
  3,372
  3,530
  3,696
Maintenance CAPEX, $m
  -467
  -477
  -488
  -501
  -515
  -530
  -547
  -566
  -586
  -608
  -631
  -656
  -683
  -711
  -741
  -773
  -807
  -843
  -881
  -921
  -963
  -1,008
  -1,055
  -1,105
  -1,157
  -1,212
  -1,270
  -1,331
  -1,395
  -1,463
New CAPEX, $m
  -54
  -60
  -69
  -77
  -86
  -94
  -103
  -111
  -120
  -128
  -137
  -146
  -156
  -166
  -176
  -186
  -197
  -209
  -220
  -233
  -246
  -259
  -273
  -288
  -303
  -319
  -336
  -353
  -372
  -391
Cash from investing activities, $m
  -521
  -537
  -557
  -578
  -601
  -624
  -650
  -677
  -706
  -736
  -768
  -802
  -839
  -877
  -917
  -959
  -1,004
  -1,052
  -1,101
  -1,154
  -1,209
  -1,267
  -1,328
  -1,393
  -1,460
  -1,531
  -1,606
  -1,684
  -1,767
  -1,854
Free cash flow, $m
  731
  742
  753
  766
  781
  798
  816
  837
  860
  884
  872
  901
  931
  964
  999
  1,036
  1,075
  1,117
  1,161
  1,208
  1,257
  1,309
  1,364
  1,422
  1,484
  1,548
  1,616
  1,688
  1,763
  1,842
Issuance/(repayment) of debt, $m
  151
  182
  208
  233
  258
  283
  309
  334
  360
  386
  413
  441
  469
  499
  529
  561
  594
  628
  663
  701
  739
  780
  822
  866
  912
  960
  1,010
  1,063
  1,119
  1,177
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  151
  182
  208
  233
  258
  283
  309
  334
  360
  386
  413
  441
  469
  499
  529
  561
  594
  628
  663
  701
  739
  780
  822
  866
  912
  960
  1,010
  1,063
  1,119
  1,177
Total cash flow (excl. dividends), $m
  882
  924
  961
  999
  1,039
  1,081
  1,125
  1,171
  1,219
  1,270
  1,285
  1,342
  1,401
  1,463
  1,528
  1,597
  1,669
  1,745
  1,824
  1,908
  1,996
  2,089
  2,186
  2,288
  2,395
  2,508
  2,627
  2,751
  2,882
  3,019
Retained Cash Flow (-), $m
  -33
  -39
  -45
  -50
  -56
  -61
  -66
  -72
  -77
  -83
  -89
  -95
  -101
  -107
  -114
  -121
  -128
  -135
  -143
  -151
  -159
  -168
  -177
  -186
  -196
  -206
  -217
  -229
  -241
  -253
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  849
  885
  916
  949
  983
  1,020
  1,059
  1,099
  1,142
  1,187
  1,197
  1,247
  1,300
  1,355
  1,414
  1,476
  1,541
  1,610
  1,682
  1,757
  1,837
  1,921
  2,009
  2,102
  2,199
  2,302
  2,409
  2,522
  2,641
  2,766
Discount rate, %
  4.40
  4.62
  4.85
  5.09
  5.35
  5.62
  5.90
  6.19
  6.50
  6.83
  7.17
  7.53
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
PV of cash for distribution, $m
  813
  808
  795
  778
  758
  735
  709
  680
  648
  613
  559
  522
  484
  444
  404
  364
  324
  286
  248
  213
  181
  151
  124
  100
  80
  62
  48
  36
  26
  19
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Seagate Technology public limited company is a provider of electronic data storage technology and solutions. The Company's principal products are hard disk drives (HDDs). In addition to HDDs, it produces a range of electronic data storage products, including solid state hybrid drives, solid state drives, peripheral component interconnect express (PCIe) cards and serial advanced technology architecture (SATA) controllers. Its storage technology portfolio also includes storage subsystems and high performance computing solutions. Its products are designed for applications in enterprise servers and storage systems, client compute applications and client non-compute applications. It designs, fabricates and assembles various components found in its disk drives, including read/write heads and recording media. Its design and manufacturing operations are based on technology platforms that are used to produce various disk drive products that serve multiple data storage applications and markets.

FINANCIAL RATIOS  of  Seagate Technology PLC (STX)

Valuation Ratios
P/E Ratio 18
Price to Sales 1.3
Price to Book 10.2
Price to Tangible Book
Price to Cash Flow 7.3
Price to Free Cash Flow 9.4
Growth Rates
Sales Growth Rate -3.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -26.1%
Cap. Spend. - 3 Yr. Gr. Rate -4.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 368.1%
Total Debt to Equity 368.1%
Interest Coverage 6
Management Effectiveness
Return On Assets 10.7%
Ret/ On Assets - 3 Yr. Avg. 11.8%
Return On Total Capital 12.8%
Ret/ On T. Cap. - 3 Yr. Avg. 13.9%
Return On Equity 52.2%
Return On Equity - 3 Yr. Avg. 40.8%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 29.5%
Gross Margin - 3 Yr. Avg. 26.9%
EBITDA Margin 16.1%
EBITDA Margin - 3 Yr. Avg. 16.6%
Operating Margin 9.8%
Oper. Margin - 3 Yr. Avg. 9.6%
Pre-Tax Margin 7.6%
Pre-Tax Margin - 3 Yr. Avg. 8.1%
Net Profit Margin 7.2%
Net Profit Margin - 3 Yr. Avg. 7.4%
Effective Tax Rate 5.3%
Eff/ Tax Rate - 3 Yr. Avg. 8.8%
Payout Ratio 72.7%

STX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the STX stock intrinsic value calculation we used $11184 million for the last fiscal year's total revenue generated by Seagate Technology PLC. The default revenue input number comes from 0001 income statement of Seagate Technology PLC. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our STX stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.4%, whose default value for STX is calculated based on our internal credit rating of Seagate Technology PLC, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Seagate Technology PLC.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of STX stock the variable cost ratio is equal to 90.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for STX stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Seagate Technology PLC.

Corporate tax rate of 27% is the nominal tax rate for Seagate Technology PLC. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the STX stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for STX are equal to 23%.

Life of production assets of 5.5 years is the average useful life of capital assets used in Seagate Technology PLC operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for STX is equal to -2.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $1665 million for Seagate Technology PLC - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 279.153 million for Seagate Technology PLC is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Seagate Technology PLC at the current share price and the inputted number of shares is $13.3 billion.

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