Intrinsic value of Western Digital - WDC

Previous Close

$76.64

  Intrinsic Value

$1,435

stock screener

  Rating & Target

str. buy

+999%

Previous close

$76.64

 
Intrinsic value

$1,435

 
Up/down potential

+999%

 
Rating

str. buy

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

Revenue (in 2017), $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 22.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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, %
  46.90
  42.71
  38.94
  35.55
  32.49
  29.74
  27.27
  25.04
  23.04
  21.23
  19.61
  18.15
  16.83
  15.65
  14.59
  13.63
  12.76
  11.99
  11.29
  10.66
  10.09
  9.58
  9.13
  8.71
  8.34
  8.01
  7.71
  7.44
  7.19
  6.97
Revenue, $m
  28,048
  40,027
  55,613
  75,380
  99,872
  129,575
  164,907
  206,201
  253,703
  307,571
  367,885
  434,651
  507,819
  587,295
  672,954
  764,656
  862,258
  965,623
  1,074,632
  1,189,189
  1,309,226
  1,434,711
  1,565,646
  1,702,069
  1,844,060
  1,991,732
  2,145,238
  2,304,768
  2,470,546
  2,642,831
Variable operating expenses, $m
  20,555
  28,743
  39,397
  52,908
  69,649
  89,952
  114,102
  142,328
  174,797
  211,617
  251,460
  297,096
  347,109
  401,433
  459,983
  522,664
  589,378
  660,031
  734,542
  812,844
  894,893
  980,666
  1,070,163
  1,163,413
  1,260,467
  1,361,405
  1,466,331
  1,575,375
  1,688,689
  1,806,450
Fixed operating expenses, $m
  2,826
  2,888
  2,952
  3,016
  3,083
  3,151
  3,220
  3,291
  3,363
  3,437
  3,513
  3,590
  3,669
  3,750
  3,832
  3,917
  4,003
  4,091
  4,181
  4,273
  4,367
  4,463
  4,561
  4,661
  4,764
  4,869
  4,976
  5,085
  5,197
  5,312
Total operating expenses, $m
  23,381
  31,631
  42,349
  55,924
  72,732
  93,103
  117,322
  145,619
  178,160
  215,054
  254,973
  300,686
  350,778
  405,183
  463,815
  526,581
  593,381
  664,122
  738,723
  817,117
  899,260
  985,129
  1,074,724
  1,168,074
  1,265,231
  1,366,274
  1,471,307
  1,580,460
  1,693,886
  1,811,762
Operating income, $m
  4,667
  8,396
  13,265
  19,456
  27,140
  36,473
  47,585
  60,582
  75,543
  92,517
  112,912
  133,965
  157,041
  182,112
  209,139
  238,075
  268,877
  301,502
  335,910
  372,072
  409,966
  449,582
  490,921
  533,995
  578,829
  625,458
  673,931
  724,308
  776,661
  831,069
EBITDA, $m
  8,648
  13,486
  19,798
  27,820
  37,772
  49,855
  64,239
  81,060
  100,419
  122,381
  146,978
  174,213
  204,065
  236,496
  271,454
  308,883
  348,723
  390,918
  435,421
  482,191
  531,201
  582,437
  635,900
  691,607
  749,588
  809,892
  872,580
  937,730
  1,005,433
  1,075,796
Interest expense (income), $m
  777
  723
  1,201
  1,841
  2,673
  3,728
  5,036
  6,621
  8,508
  10,712
  13,248
  16,124
  19,344
  22,909
  26,815
  31,058
  35,631
  40,527
  45,738
  51,256
  57,076
  63,192
  69,600
  76,300
  83,290
  90,573
  98,154
  106,038
  114,233
  122,750
  131,601
Earnings before tax, $m
  3,943
  7,195
  11,424
  16,783
  23,412
  31,437
  40,963
  52,075
  64,830
  79,268
  96,788
  114,620
  134,132
  155,297
  178,080
  202,444
  228,350
  255,764
  284,654
  314,996
  346,774
  379,982
  414,622
  450,705
  488,255
  527,304
  567,893
  610,075
  653,910
  699,469
Tax expense, $m
  1,065
  1,943
  3,084
  4,531
  6,321
  8,488
  11,060
  14,060
  17,504
  21,402
  26,133
  30,947
  36,216
  41,930
  48,082
  54,660
  61,655
  69,056
  76,856
  85,049
  93,629
  102,595
  111,948
  121,690
  131,829
  142,372
  153,331
  164,720
  176,556
  188,857
Net income, $m
  2,879
  5,252
  8,340
  12,251
  17,091
  22,949
  29,903
  38,014
  47,326
  57,866
  70,655
  83,673
  97,917
  113,367
  129,999
  147,784
  166,696
  186,708
  207,797
  229,947
  253,145
  277,387
  302,674
  329,015
  356,426
  384,932
  414,562
  445,355
  477,355
  510,612

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
  40,886
  58,348
  81,068
  109,884
  145,586
  188,885
  240,389
  300,585
  369,829
  448,354
  536,275
  633,602
  740,261
  856,115
  980,982
  1,114,659
  1,256,936
  1,407,614
  1,566,519
  1,733,512
  1,908,493
  2,091,416
  2,282,282
  2,481,151
  2,688,134
  2,903,399
  3,127,170
  3,359,721
  3,601,380
  3,852,523
Adjusted assets (=assets-cash), $m
  40,886
  58,348
  81,068
  109,884
  145,586
  188,885
  240,389
  300,585
  369,829
  448,354
  536,275
  633,602
  740,261
  856,115
  980,982
  1,114,659
  1,256,936
  1,407,614
  1,566,519
  1,733,512
  1,908,493
  2,091,416
  2,282,282
  2,481,151
  2,688,134
  2,903,399
  3,127,170
  3,359,721
  3,601,380
  3,852,523
Revenue / Adjusted assets
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
Average production assets, $m
  25,972
  37,065
  51,497
  69,802
  92,481
  119,987
  152,704
  190,942
  234,929
  284,811
  340,661
  402,487
  470,240
  543,835
  623,155
  708,072
  798,451
  894,167
  995,110
  1,101,189
  1,212,344
  1,328,543
  1,449,788
  1,576,116
  1,707,599
  1,844,344
  1,986,491
  2,134,216
  2,287,726
  2,447,262
Working capital, $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 debt, $m
  21,448
  32,869
  47,728
  66,573
  89,922
  118,240
  151,924
  191,291
  236,577
  287,933
  345,433
  409,085
  478,840
  554,608
  636,272
  723,696
  816,745
  915,289
  1,019,213
  1,128,426
  1,242,864
  1,362,495
  1,487,322
  1,617,382
  1,752,748
  1,893,532
  2,039,878
  2,191,966
  2,350,011
  2,514,259
Total liabilities, $m
  26,739
  38,160
  53,019
  71,864
  95,213
  123,531
  157,215
  196,582
  241,868
  293,224
  350,724
  414,376
  484,131
  559,899
  641,563
  728,987
  822,036
  920,580
  1,024,504
  1,133,717
  1,248,155
  1,367,786
  1,492,613
  1,622,673
  1,758,039
  1,898,823
  2,045,169
  2,197,257
  2,355,302
  2,519,550
Total equity, $m
  14,146
  20,188
  28,050
  38,020
  50,373
  65,354
  83,175
  104,002
  127,961
  155,131
  185,551
  219,226
  256,130
  296,216
  339,420
  385,672
  434,900
  487,035
  542,016
  599,795
  660,339
  723,630
  789,670
  858,478
  930,094
  1,004,576
  1,082,001
  1,162,463
  1,246,077
  1,332,973
Total liabilities and equity, $m
  40,885
  58,348
  81,069
  109,884
  145,586
  188,885
  240,390
  300,584
  369,829
  448,355
  536,275
  633,602
  740,261
  856,115
  980,983
  1,114,659
  1,256,936
  1,407,615
  1,566,520
  1,733,512
  1,908,494
  2,091,416
  2,282,283
  2,481,151
  2,688,133
  2,903,399
  3,127,170
  3,359,720
  3,601,379
  3,852,523
Debt-to-equity ratio
  1.520
  1.630
  1.700
  1.750
  1.790
  1.810
  1.830
  1.840
  1.850
  1.860
  1.860
  1.870
  1.870
  1.870
  1.870
  1.880
  1.880
  1.880
  1.880
  1.880
  1.880
  1.880
  1.880
  1.880
  1.880
  1.880
  1.890
  1.890
  1.890
  1.890
Adjusted equity ratio
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,879
  5,252
  8,340
  12,251
  17,091
  22,949
  29,903
  38,014
  47,326
  57,866
  70,655
  83,673
  97,917
  113,367
  129,999
  147,784
  166,696
  186,708
  207,797
  229,947
  253,145
  277,387
  302,674
  329,015
  356,426
  384,932
  414,562
  445,355
  477,355
  510,612
Depreciation, amort., depletion, $m
  3,981
  5,090
  6,533
  8,364
  10,632
  13,382
  16,654
  20,478
  24,877
  29,865
  34,066
  40,249
  47,024
  54,383
  62,316
  70,807
  79,845
  89,417
  99,511
  110,119
  121,234
  132,854
  144,979
  157,612
  170,760
  184,434
  198,649
  213,422
  228,773
  244,726
Funds from operations, $m
  6,860
  10,342
  14,873
  20,615
  27,723
  36,331
  46,557
  58,492
  72,203
  87,731
  104,721
  123,921
  144,941
  167,751
  192,314
  218,591
  246,541
  276,124
  307,308
  340,066
  374,380
  410,241
  447,653
  486,626
  527,186
  569,366
  613,211
  658,776
  706,127
  755,338
Change in working capital, $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 operations, $m
  6,860
  10,342
  14,873
  20,615
  27,723
  36,331
  46,557
  58,492
  72,203
  87,731
  104,721
  123,921
  144,941
  167,751
  192,314
  218,591
  246,541
  276,124
  307,308
  340,066
  374,380
  410,241
  447,653
  486,626
  527,186
  569,366
  613,211
  658,776
  706,127
  755,338
Maintenance CAPEX, $m
  -1,768
  -2,597
  -3,706
  -5,150
  -6,980
  -9,248
  -11,999
  -15,270
  -19,094
  -23,493
  -28,481
  -34,066
  -40,249
  -47,024
  -54,383
  -62,316
  -70,807
  -79,845
  -89,417
  -99,511
  -110,119
  -121,234
  -132,854
  -144,979
  -157,612
  -170,760
  -184,434
  -198,649
  -213,422
  -228,773
New CAPEX, $m
  -8,293
  -11,093
  -14,433
  -18,305
  -22,679
  -27,505
  -32,717
  -38,238
  -43,987
  -49,882
  -55,850
  -61,825
  -67,754
  -73,595
  -79,320
  -84,916
  -90,379
  -95,716
  -100,942
  -106,079
  -111,155
  -116,199
  -121,245
  -126,328
  -131,483
  -136,744
  -142,147
  -147,725
  -153,510
  -159,536
Cash from investing activities, $m
  -10,061
  -13,690
  -18,139
  -23,455
  -29,659
  -36,753
  -44,716
  -53,508
  -63,081
  -73,375
  -84,331
  -95,891
  -108,003
  -120,619
  -133,703
  -147,232
  -161,186
  -175,561
  -190,359
  -205,590
  -221,274
  -237,433
  -254,099
  -271,307
  -289,095
  -307,504
  -326,581
  -346,374
  -366,932
  -388,309
Free cash flow, $m
  -3,201
  -3,348
  -3,266
  -2,839
  -1,937
  -422
  1,841
  4,984
  9,122
  14,356
  20,390
  28,030
  36,938
  47,132
  58,610
  71,360
  85,354
  100,563
  116,949
  134,475
  153,106
  172,808
  193,553
  215,319
  238,092
  261,862
  286,630
  312,403
  339,195
  367,030
Issuance/(repayment) of debt, $m
  8,530
  11,420
  14,859
  18,846
  23,349
  28,318
  33,684
  39,368
  45,286
  51,356
  57,500
  63,652
  69,755
  75,768
  81,663
  87,425
  93,049
  98,544
  103,924
  109,213
  114,438
  119,631
  124,827
  130,060
  135,367
  140,784
  146,346
  152,088
  158,045
  164,248
Issuance/(repurchase) of shares, $m
  1,651
  790
  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  
  10,181
  12,210
  14,859
  18,846
  23,349
  28,318
  33,684
  39,368
  45,286
  51,356
  57,500
  63,652
  69,755
  75,768
  81,663
  87,425
  93,049
  98,544
  103,924
  109,213
  114,438
  119,631
  124,827
  130,060
  135,367
  140,784
  146,346
  152,088
  158,045
  164,248
Total cash flow (excl. dividends), $m
  6,980
  8,863
  11,593
  16,006
  21,412
  27,896
  35,525
  44,351
  54,408
  65,711
  77,890
  91,682
  106,693
  122,900
  140,274
  158,784
  178,403
  199,107
  220,873
  243,688
  267,544
  292,439
  318,380
  345,379
  373,458
  402,645
  432,976
  464,491
  497,240
  531,278
Retained Cash Flow (-), $m
  -4,529
  -6,042
  -7,861
  -9,970
  -12,353
  -14,982
  -17,820
  -20,827
  -23,959
  -27,170
  -30,421
  -33,675
  -36,904
  -40,085
  -43,204
  -46,252
  -49,228
  -52,135
  -54,981
  -57,779
  -60,544
  -63,291
  -66,040
  -68,808
  -71,616
  -74,482
  -77,425
  -80,463
  -83,614
  -86,896
Prev. year cash balance distribution, $m
  1,801
  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
  401
  589
  841
  1,168
  1,583
  2,097
  2,721
  3,463
  4,330
  5,328
  6,459
  7,726
  9,128
  10,664
  12,333
  14,132
  16,058
  18,107
  20,278
  22,567
  24,973
  27,494
  30,129
  32,879
  35,743
  38,725
  41,826
  45,050
  48,400
  51,881
Cash available for distribution, $m
  4,251
  2,821
  3,732
  6,036
  9,059
  12,914
  17,705
  23,524
  30,449
  38,541
  47,469
  58,007
  69,789
  82,815
  97,070
  112,532
  129,176
  146,972
  165,892
  185,909
  207,000
  229,148
  252,340
  276,571
  301,842
  328,164
  355,551
  384,028
  413,626
  444,382
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
  4,072
  2,577
  3,237
  4,948
  6,982
  9,304
  11,855
  14,548
  17,274
  19,914
  22,169
  24,285
  25,967
  27,132
  27,729
  27,738
  27,170
  26,070
  24,507
  22,572
  20,367
  18,002
  15,580
  13,199
  10,940
  8,867
  7,022
  5,430
  4,097
  3,013
Current shareholders' claim on cash, %
  91.8
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3

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 56.8
Price to Sales 1.2
Price to Book 2
Price to Tangible Book
Price to Cash Flow 6.6
Price to Free Cash Flow 7.9
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 46.9% 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 4.4%, 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 $2765 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 5.6% 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 2.1%.

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 92.6%.

Life of production assets of 10 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 0%. 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 288 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 $22.1 billion.

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