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Western Digital Corp  (NAS:WDC) Financial Strength: 5 (As of Mar. 2019)

Western Digital Corp has the Financial Strength Rank of 5.

GuruFocus Financial Strength Rank measures how strong a company's financial situation is. It is based on these factors:

1. The debt burden that the company has as measured by its Interest Coverage (current year). The higher, the better.
2. Debt to revenue ratio. The lower, the better.
3. Altman Z-Score.

Western Digital Corp did not have earnings to cover the interest expense. Western Digital Corp's debt to revenue ratio for the quarter that ended in Mar. 2019 was 2.88. As of today, Western Digital Corp's Altman Z-Score is 1.92.


Competitive Comparison
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap.


Western Digital Corp Distribution

* The bar in red indicates where Western Digital Corp's Financial Strength falls into.



Calculation

GuruFocus Financial Strength Rank measures how strong a company's financial situation is. It is based on these factors

A company ranks high with financial strength is likely to withstand any business slowdowns and recessions.

1. The debt burden that the company has as measured by its Interest Coverage (current year). The higher, the better.

Note: If both Interest Expense and Interest Income are empty, while Net Interest Income is negative, then use Net Interest Income as Interest Expense.

Interest Coverage is a ratio that determines how easily a company can pay interest expenses on outstanding debt. It is calculated by dividing a company's Operating Income (EBIT) by its Interest Expense:

Western Digital Corp's Interest Expense for the months ended in Mar. 2019 was $-118 Mil. Its Operating Income for the months ended in Mar. 2019 was $-318 Mil. And its Long-Term Debt & Capital Lease Obligation for the quarter that ended in Mar. 2019 was $10,309 Mil.

Western Digital Corp's Interest Coverage for the quarter that ended in Mar. 2019 is

Western Digital Corp did not have earnings to cover the interest expense.

The higher the ratio, the stronger the company's financial strength is.

2. Debt to revenue ratio. The lower, the better.

Western Digital Corp's Debt to Revenue Ratio for the quarter that ended in Mar. 2019 is

Debt to Revenue Ratio=Total Debt (Q: Mar. 2019 ) / Revenue (Q: Mar. 2019 )
=(Current Portion of Long-Term Debt + Long-Term Debt & Capital Lease Obligation) / Revenue
=(276 + 10309) / 3674
=2.88

3. Altman Z-Score.

Z-Score model is an accurate forecaster of failure up to two years prior to distress. It can be considered the assessment of the distress of industrial corporations.

The zones of discrimination were as such:

When Z-Score is less than 1.81, it is in Distress Zones.
When Z-Score is greater than 2.99, it is in Safe Zones.
When Z-Score is between 1.81 and 2.99, it is in Grey Zones.

Western Digital Corp has a Z-score of 1.92, indicating it is in Grey Zones. This implies that Western Digital Corp is in some kind of financial stress. If it is below 1.81, the company may faces bankrupcy risk.

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.


Explanation

The maximum rank is 10. Companies with rank 7 or higher will be unlikely to fall into distressed situations. Companies with rank of 3 or less are likely in financial distress.

Western Digital Corp has the Financial Strength Rank of 5.


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