Intrinsic value of Western Digital - WDC

Previous Close

$85.16

  Intrinsic Value

$207.52

stock screener

  Rating & Target

str. buy

+144%

Previous close

$85.16

 
Intrinsic value

$207.52

 
Up/down potential

+144%

 
Rating

str. buy

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of WDC 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  46.94
  9.90
  9.41
  8.97
  8.57
  8.21
  7.89
  7.60
  7.34
  7.11
  6.90
  6.71
  6.54
  6.38
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
Revenue, $m
  19,093
  20,983
  22,958
  25,017
  27,161
  29,393
  31,713
  34,124
  36,630
  39,234
  41,941
  44,754
  47,680
  50,724
  53,892
  57,191
  60,627
  64,209
  67,944
  71,841
  75,909
  80,156
  84,594
  89,232
  94,081
  99,153
  104,459
  110,013
  115,827
  121,915
  128,292
Variable operating expenses, $m
 
  15,764
  17,153
  18,602
  20,111
  21,681
  23,313
  25,009
  26,772
  28,605
  30,509
  31,487
  33,545
  35,687
  37,916
  40,237
  42,654
  45,174
  47,802
  50,544
  53,406
  56,394
  59,516
  62,779
  66,191
  69,759
  73,492
  77,400
  81,490
  85,774
  90,260
Fixed operating expenses, $m
 
  2,841
  2,912
  2,985
  3,060
  3,136
  3,215
  3,295
  3,377
  3,462
  3,548
  3,637
  3,728
  3,821
  3,917
  4,015
  4,115
  4,218
  4,323
  4,431
  4,542
  4,656
  4,772
  4,892
  5,014
  5,139
  5,268
  5,399
  5,534
  5,673
  5,814
Total operating expenses, $m
  17,139
  18,605
  20,065
  21,587
  23,171
  24,817
  26,528
  28,304
  30,149
  32,067
  34,057
  35,124
  37,273
  39,508
  41,833
  44,252
  46,769
  49,392
  52,125
  54,975
  57,948
  61,050
  64,288
  67,671
  71,205
  74,898
  78,760
  82,799
  87,024
  91,447
  96,074
Operating income, $m
  1,954
  2,378
  2,892
  3,430
  3,991
  4,576
  5,185
  5,820
  6,480
  7,168
  7,883
  9,630
  10,407
  11,216
  12,059
  12,939
  13,858
  14,817
  15,819
  16,866
  17,961
  19,106
  20,306
  21,561
  22,876
  24,255
  25,699
  27,214
  28,802
  30,469
  32,218
EBITDA, $m
  4,082
  4,398
  5,008
  5,646
  6,311
  7,004
  7,726
  8,478
  9,260
  10,074
  10,921
  11,803
  12,722
  13,679
  14,676
  15,716
  16,801
  17,934
  19,118
  20,354
  21,646
  22,998
  24,413
  25,894
  27,444
  29,069
  30,771
  32,555
  34,426
  36,388
  38,447
Interest expense (income), $m
  777
  672
  765
  863
  965
  1,071
  1,182
  1,297
  1,416
  1,541
  1,670
  1,804
  1,943
  2,088
  2,239
  2,396
  2,560
  2,730
  2,908
  3,093
  3,286
  3,488
  3,698
  3,918
  4,148
  4,388
  4,640
  4,903
  5,178
  5,466
  5,768
Earnings before tax, $m
  769
  1,706
  2,127
  2,567
  3,026
  3,504
  4,003
  4,523
  5,064
  5,627
  6,214
  7,826
  8,463
  9,127
  9,820
  10,543
  11,298
  12,087
  12,911
  13,773
  14,675
  15,619
  16,607
  17,643
  18,728
  19,866
  21,059
  22,311
  23,624
  25,003
  26,449
Tax expense, $m
  372
  461
  574
  693
  817
  946
  1,081
  1,221
  1,367
  1,519
  1,678
  2,113
  2,285
  2,464
  2,651
  2,847
  3,050
  3,263
  3,486
  3,719
  3,962
  4,217
  4,484
  4,764
  5,057
  5,364
  5,686
  6,024
  6,379
  6,751
  7,141
Net income, $m
  397
  1,245
  1,553
  1,874
  2,209
  2,558
  2,922
  3,302
  3,697
  4,108
  4,536
  5,713
  6,178
  6,663
  7,169
  7,696
  8,248
  8,823
  9,425
  10,054
  10,713
  11,402
  12,123
  12,879
  13,672
  14,502
  15,373
  16,287
  17,246
  18,252
  19,308

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  6,378
  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
  29,860
  25,810
  28,238
  30,771
  33,409
  36,153
  39,007
  41,973
  45,055
  48,258
  51,588
  55,048
  58,647
  62,391
  66,288
  70,345
  74,572
  78,978
  83,572
  88,365
  93,369
  98,593
  104,052
  109,756
  115,721
  121,959
  128,486
  135,317
  142,468
  149,957
  157,801
Adjusted assets (=assets-cash), $m
  23,482
  25,810
  28,238
  30,771
  33,409
  36,153
  39,007
  41,973
  45,055
  48,258
  51,588
  55,048
  58,647
  62,391
  66,288
  70,345
  74,572
  78,978
  83,572
  88,365
  93,369
  98,593
  104,052
  109,756
  115,721
  121,959
  128,486
  135,317
  142,468
  149,957
  157,801
Revenue / Adjusted assets
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
Average production assets, $m
  7,697
  8,456
  9,252
  10,082
  10,946
  11,845
  12,780
  13,752
  14,762
  15,811
  16,902
  18,036
  19,215
  20,442
  21,718
  23,048
  24,433
  25,876
  27,382
  28,952
  30,591
  32,303
  34,091
  35,960
  37,915
  39,959
  42,097
  44,335
  46,678
  49,132
  51,702
Working capital, $m
  6,712
  629
  689
  751
  815
  882
  951
  1,024
  1,099
  1,177
  1,258
  1,343
  1,430
  1,522
  1,617
  1,716
  1,819
  1,926
  2,038
  2,155
  2,277
  2,405
  2,538
  2,677
  2,822
  2,975
  3,134
  3,300
  3,475
  3,657
  3,849
Total debt, $m
  13,151
  14,711
  16,594
  18,557
  20,601
  22,728
  24,939
  27,238
  29,627
  32,109
  34,689
  37,371
  40,161
  43,062
  46,082
  49,227
  52,502
  55,917
  59,477
  63,192
  67,070
  71,119
  75,349
  79,770
  84,393
  89,227
  94,286
  99,580
  105,122
  110,926
  117,005
Total liabilities, $m
  18,442
  20,002
  21,885
  23,848
  25,892
  28,019
  30,230
  32,529
  34,918
  37,400
  39,980
  42,662
  45,452
  48,353
  51,373
  54,518
  57,793
  61,208
  64,768
  68,483
  72,361
  76,410
  80,640
  85,061
  89,684
  94,518
  99,577
  104,871
  110,413
  116,217
  122,296
Total equity, $m
  11,418
  5,807
  6,354
  6,923
  7,517
  8,134
  8,777
  9,444
  10,137
  10,858
  11,607
  12,386
  13,196
  14,038
  14,915
  15,828
  16,779
  17,770
  18,804
  19,882
  21,008
  22,183
  23,412
  24,695
  26,037
  27,441
  28,909
  30,446
  32,055
  33,740
  35,505
Total liabilities and equity, $m
  29,860
  25,809
  28,239
  30,771
  33,409
  36,153
  39,007
  41,973
  45,055
  48,258
  51,587
  55,048
  58,648
  62,391
  66,288
  70,346
  74,572
  78,978
  83,572
  88,365
  93,369
  98,593
  104,052
  109,756
  115,721
  121,959
  128,486
  135,317
  142,468
  149,957
  157,801
Debt-to-equity ratio
  1.152
  2.530
  2.610
  2.680
  2.740
  2.790
  2.840
  2.880
  2.920
  2.960
  2.990
  3.020
  3.040
  3.070
  3.090
  3.110
  3.130
  3.150
  3.160
  3.180
  3.190
  3.210
  3.220
  3.230
  3.240
  3.250
  3.260
  3.270
  3.280
  3.290
  3.300
Adjusted equity ratio
  0.215
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  397
  1,245
  1,553
  1,874
  2,209
  2,558
  2,922
  3,302
  3,697
  4,108
  4,536
  5,713
  6,178
  6,663
  7,169
  7,696
  8,248
  8,823
  9,425
  10,054
  10,713
  11,402
  12,123
  12,879
  13,672
  14,502
  15,373
  16,287
  17,246
  18,252
  19,308
Depreciation, amort., depletion, $m
  2,128
  2,020
  2,116
  2,216
  2,320
  2,429
  2,541
  2,658
  2,780
  2,906
  3,038
  2,173
  2,315
  2,463
  2,617
  2,777
  2,944
  3,118
  3,299
  3,488
  3,686
  3,892
  4,107
  4,333
  4,568
  4,814
  5,072
  5,342
  5,624
  5,919
  6,229
Funds from operations, $m
  3,528
  3,266
  3,669
  4,090
  4,529
  4,987
  5,464
  5,960
  6,476
  7,014
  7,574
  7,886
  8,493
  9,126
  9,785
  10,473
  11,191
  11,941
  12,724
  13,542
  14,398
  15,294
  16,231
  17,212
  18,240
  19,317
  20,445
  21,629
  22,870
  24,171
  25,537
Change in working capital, $m
  91
  57
  59
  62
  64
  67
  70
  72
  75
  78
  81
  84
  88
  91
  95
  99
  103
  107
  112
  117
  122
  127
  133
  139
  145
  152
  159
  167
  174
  183
  191
Cash from operations, $m
  3,437
  3,209
  3,610
  4,028
  4,465
  4,920
  5,394
  5,888
  6,401
  6,936
  7,493
  7,802
  8,406
  9,035
  9,690
  10,374
  11,088
  11,833
  12,612
  13,426
  14,276
  15,166
  16,098
  17,073
  18,094
  19,164
  20,286
  21,462
  22,695
  23,989
  25,346
Maintenance CAPEX, $m
  0
  -927
  -1,019
  -1,115
  -1,215
  -1,319
  -1,427
  -1,540
  -1,657
  -1,779
  -1,905
  -2,036
  -2,173
  -2,315
  -2,463
  -2,617
  -2,777
  -2,944
  -3,118
  -3,299
  -3,488
  -3,686
  -3,892
  -4,107
  -4,333
  -4,568
  -4,814
  -5,072
  -5,342
  -5,624
  -5,919
New CAPEX, $m
  -578
  -760
  -796
  -830
  -864
  -899
  -935
  -972
  -1,010
  -1,049
  -1,091
  -1,134
  -1,179
  -1,227
  -1,277
  -1,329
  -1,385
  -1,443
  -1,505
  -1,570
  -1,639
  -1,712
  -1,788
  -1,869
  -1,954
  -2,044
  -2,138
  -2,238
  -2,343
  -2,454
  -2,570
Cash from investing activities, $m
  -636
  -1,687
  -1,815
  -1,945
  -2,079
  -2,218
  -2,362
  -2,512
  -2,667
  -2,828
  -2,996
  -3,170
  -3,352
  -3,542
  -3,740
  -3,946
  -4,162
  -4,387
  -4,623
  -4,869
  -5,127
  -5,398
  -5,680
  -5,976
  -6,287
  -6,612
  -6,952
  -7,310
  -7,685
  -8,078
  -8,489
Free cash flow, $m
  2,801
  1,522
  1,795
  2,084
  2,386
  2,702
  3,032
  3,376
  3,735
  4,108
  4,497
  4,632
  5,053
  5,493
  5,951
  6,428
  6,926
  7,446
  7,989
  8,556
  9,149
  9,769
  10,417
  11,096
  11,807
  12,552
  13,333
  14,152
  15,011
  15,911
  16,856
Issuance/(repayment) of debt, $m
  -4,281
  1,793
  1,882
  1,963
  2,044
  2,127
  2,212
  2,299
  2,389
  2,482
  2,580
  2,682
  2,789
  2,902
  3,020
  3,145
  3,276
  3,414
  3,561
  3,715
  3,877
  4,049
  4,230
  4,421
  4,622
  4,835
  5,058
  5,294
  5,542
  5,804
  6,079
Issuance/(repurchase) of shares, $m
  296
  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  
  -4,021
  1,793
  1,882
  1,963
  2,044
  2,127
  2,212
  2,299
  2,389
  2,482
  2,580
  2,682
  2,789
  2,902
  3,020
  3,145
  3,276
  3,414
  3,561
  3,715
  3,877
  4,049
  4,230
  4,421
  4,622
  4,835
  5,058
  5,294
  5,542
  5,804
  6,079
Total cash flow (excl. dividends), $m
  -1,223
  3,315
  3,677
  4,046
  4,430
  4,829
  5,243
  5,675
  6,123
  6,590
  7,077
  7,314
  7,843
  8,394
  8,971
  9,573
  10,202
  10,861
  11,550
  12,271
  13,026
  13,818
  14,648
  15,517
  16,430
  17,387
  18,392
  19,446
  20,553
  21,715
  22,936
Retained Cash Flow (-), $m
  -273
  -534
  -546
  -570
  -593
  -618
  -642
  -667
  -694
  -721
  -749
  -779
  -810
  -842
  -877
  -913
  -951
  -991
  -1,034
  -1,078
  -1,126
  -1,176
  -1,228
  -1,284
  -1,342
  -1,404
  -1,469
  -1,537
  -1,609
  -1,685
  -1,765
Prev. year cash balance distribution, $m
 
  6,145
  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
 
  8,926
  3,131
  3,477
  3,837
  4,211
  4,601
  5,007
  5,430
  5,870
  6,328
  6,535
  7,033
  7,552
  8,094
  8,660
  9,251
  9,869
  10,516
  11,192
  11,901
  12,642
  13,419
  14,234
  15,088
  15,984
  16,923
  17,909
  18,944
  20,030
  21,171
Discount rate, %
 
  4.80
  5.04
  5.29
  5.56
  5.83
  6.13
  6.43
  6.75
  7.09
  7.45
  7.82
  8.21
  8.62
  9.05
  9.50
  9.98
  10.48
  11.00
  11.55
  12.13
  12.74
  13.37
  14.04
  14.74
  15.48
  16.25
  17.07
  17.92
  18.82
  19.76
PV of cash for distribution, $m
 
  8,517
  2,838
  2,978
  3,090
  3,172
  3,221
  3,237
  3,219
  3,168
  3,086
  2,855
  2,729
  2,578
  2,406
  2,219
  2,020
  1,814
  1,607
  1,402
  1,206
  1,020
  848
  693
  556
  437
  337
  254
  187
  135
  95
Current shareholders' claim on cash, %
  100
  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

Western Digital Corporation (Western Digital) is a developer, manufacturer and provider of data storage devices and solutions that address the needs of the information technology (IT) industry and the infrastructure that enables the proliferation of data in virtually every industry. The Company's portfolio of offerings addresses three categories: Datacenter Devices and Solutions (capacity and performance enterprise hard disk drives (HDDs), enterprise solid state drives (SSDs), datacenter software and system solutions); Client Devices (mobile, desktop, gaming and digital video hard drives, client SSDs, embedded products and wafers), and Client Solutions (removable products, hard drive content solutions and flash content solutions). The Company develops and manufactures a portion of the recording heads and magnetic media used in its hard drive products.

FINANCIAL RATIOS  of  Western Digital (WDC)

Valuation Ratios
P/E Ratio 63.1
Price to Sales 1.3
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 7.3
Price to Free Cash Flow 8.8
Growth Rates
Sales Growth Rate 46.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -1%
Cap. Spend. - 3 Yr. Gr. Rate -1.6%
Financial Strength
Quick Ratio 27
Current Ratio 0.1
LT Debt to Equity 113.1%
Total Debt to Equity 115.2%
Interest Coverage 2
Management Effectiveness
Return On Assets 2.5%
Ret/ On Assets - 3 Yr. Avg. 4.7%
Return On Total Capital 1.5%
Ret/ On T. Cap. - 3 Yr. Avg. 5.1%
Return On Equity 3.5%
Return On Equity - 3 Yr. Avg. 7.4%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 31.8%
Gross Margin - 3 Yr. Avg. 29.1%
EBITDA Margin 19.2%
EBITDA Margin - 3 Yr. Avg. 16.3%
Operating Margin 10.2%
Oper. Margin - 3 Yr. Avg. 8.3%
Pre-Tax Margin 4%
Pre-Tax Margin - 3 Yr. Avg. 5.3%
Net Profit Margin 2.1%
Net Profit Margin - 3 Yr. Avg. 4.7%
Effective Tax Rate 48.4%
Eff/ Tax Rate - 3 Yr. Avg. -0.9%
Payout Ratio 144.6%

WDC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WDC stock intrinsic value calculation we used $19093 million for the last fiscal year's total revenue generated by Western Digital. The default revenue input number comes from 2017 income statement of Western Digital. 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 WDC stock valuation model: a) initial revenue growth rate of 9.9% 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 4.8%, whose default value for WDC is calculated based on our internal credit rating of Western Digital, 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 Western Digital.
    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 WDC stock the variable cost ratio is equal to 75.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2772 million in the base year in the intrinsic value calculation for WDC 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 5.2% for Western Digital.

Corporate tax rate of 27% is the nominal tax rate for Western Digital. 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 WDC 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 WDC are equal to 40.3%.

Life of production assets of 8.3 years is the average useful life of capital assets used in Western Digital 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 WDC is equal to 3%. 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 - $11418 million for Western Digital - 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 299.258 million for Western Digital 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 Western Digital at the current share price and the inputted number of shares is $25.5 billion.

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Financial statements of WDC
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