Seagate Technology Holdings PLC (STX, Financial), a leading supplier of hard disk drives for data storage, has recently seen a daily gain of 2.12% and a three-month gain of 9.05%. Despite a Loss Per Share of 2.55, the question arises - is the stock modestly overvalued? This article aims to provide an in-depth analysis of the valuation of Seagate Technology Holdings PLC (STX) to answer this question. Read on for a comprehensive examination of the company's financial health, profitability, and growth prospects.
Seagate Technology Holdings PLC, with its chief rival, Western Digital, forms a practical duopoly in the hard disk drive market for data storage. The company caters to both enterprise and consumer markets and is vertically integrated. The stock price is currently at $66.84 per share with a market cap of $13.90 billion. In comparison, the fair value (GF Value) of the company is estimated at $55.49, indicating that the stock might be modestly overvalued.
Understanding GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
According to the GF Value, Seagate Technology Holdings PLC (STX, Financial) appears to be modestly overvalued. This suggests that the long-term return of its stock is likely to be lower than its business growth.
Before investing in a company, it's crucial to check its financial strength. Companies with poor financial strength pose a higher risk of permanent loss. Seagate Technology Holdings PLC has a cash-to-debt ratio of 0.14, which is worse than 92% of companies in the Hardware industry. This indicates that the financial strength of Seagate Technology Holdings PLC is poor.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, poses less risk. Seagate Technology Holdings PLC has been profitable 9 over the past 10 years. However, its operating margin of 0.81% ranks worse than 64.59% of companies in the Hardware industry. This indicates fair profitability.
Growth is a crucial factor in the valuation of a company. Seagate Technology Holdings PLC's 3-year average revenue growth rate is worse than 71.91% of companies in the Hardware industry. Its 3-year average EBITDA growth rate is -36%, which ranks worse than 94.39% of companies in the Hardware industry. This indicates poor growth.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can also evaluate its profitability. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. During the past 12 months, Seagate Technology Holdings PLC's ROIC is 1.17 while its WACC came in at 9.14.
In conclusion, Seagate Technology Holdings PLC (STX, Financial) appears to be modestly overvalued. The company's financial condition is poor, its profitability is fair, and its growth ranks worse than 94.39% of companies in the Hardware industry. To learn more about Seagate Technology Holdings PLC stock, you can check out its 30-Year Financials here.
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