Stock Analysis on Net

Western Digital Corp. (NASDAQ:WDC)

This company has been moved to the archive! The financial data has not been updated since February 12, 2024.

Dividend Discount Model (DDM) 

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Dividends are the cleanest and most straightforward measure of cash flow because these are clearly cash flows that go directly to the investor.


Intrinsic Stock Value (Valuation Summary)

Western Digital Corp., dividends per share (DPS) forecast

US$

Microsoft Excel
Year Value DPSt or Terminal value (TVt) Calculation Present value at 19.44%
0 DPS01 1.50
1 DPS1 1.49 = 1.50 × (1 + -0.73%) 1.25
2 DPS2 1.54 = 1.49 × (1 + 3.56%) 1.08
3 DPS3 1.66 = 1.54 × (1 + 7.84%) 0.98
4 DPS4 1.86 = 1.66 × (1 + 12.12%) 0.92
5 DPS5 2.17 = 1.86 × (1 + 16.40%) 0.89
5 Terminal value (TV5) 82.93 = 2.17 × (1 + 16.40%) ÷ (19.44%16.40%) 34.11
Intrinsic value of Western Digital Corp. common stock (per share) $39.22
Current share price $57.32

Based on: 10-K (reporting date: 2023-06-30).

1 DPS0 = Sum of the last year dividends per share of Western Digital Corp. common stock. See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.


Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.67%
Expected rate of return on market portfolio2 E(RM) 13.79%
Systematic risk of Western Digital Corp. common stock βWDC 1.62
 
Required rate of return on Western Digital Corp. common stock3 rWDC 19.44%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rWDC = RF + βWDC [E(RM) – RF]
= 4.67% + 1.62 [13.79%4.67%]
= 19.44%


Dividend Growth Rate (g)

Dividend growth rate (g) implied by PRAT model

Western Digital Corp., PRAT model

Microsoft Excel
Average Jun 30, 2023 Jul 1, 2022 Jul 2, 2021 Jul 3, 2020 Jun 28, 2019 Jun 29, 2018
Selected Financial Data (US$ in millions)
Dividends to shareholders 449 583 592
Net income (loss) (1,706) 1,500 821 (250) (754) 675
Revenue, net 12,318 18,793 16,922 16,736 16,569 20,647
Total assets 24,429 26,259 26,132 25,662 26,370 29,235
Shareholders’ equity 11,723 12,221 10,721 9,551 9,967 11,531
Financial Ratios
Retention rate1 1.00 1.00 0.12
Profit margin2 -13.85% 7.98% 4.85% -1.49% -4.55% 3.27%
Asset turnover3 0.50 0.72 0.65 0.65 0.63 0.71
Financial leverage4 2.08 2.15 2.44 2.69 2.65 2.54
Averages
Retention rate 0.71
Profit margin -0.63%
Asset turnover 0.67
Financial leverage 2.42
 
Dividend growth rate (g)5 -0.73%

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-07-01), 10-K (reporting date: 2021-07-02), 10-K (reporting date: 2020-07-03), 10-K (reporting date: 2019-06-28), 10-K (reporting date: 2018-06-29).

2023 Calculations

1 Retention rate = (Net income (loss) – Dividends to shareholders) ÷ Net income (loss)
= (-1,7060) ÷ -1,706
=

2 Profit margin = 100 × Net income (loss) ÷ Revenue, net
= 100 × -1,706 ÷ 12,318
= -13.85%

3 Asset turnover = Revenue, net ÷ Total assets
= 12,318 ÷ 24,429
= 0.50

4 Financial leverage = Total assets ÷ Shareholders’ equity
= 24,429 ÷ 11,723
= 2.08

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.71 × -0.63% × 0.67 × 2.42
= -0.73%


Dividend growth rate (g) implied by Gordon growth model

g = 100 × (P0 × rD0) ÷ (P0 + D0)
= 100 × ($57.32 × 19.44%$1.50) ÷ ($57.32 + $1.50)
= 16.40%

where:
P0 = current price of share of Western Digital Corp. common stock
D0 = the last year dividends per share of Western Digital Corp. common stock
r = required rate of return on Western Digital Corp. common stock


Dividend growth rate (g) forecast

Western Digital Corp., H-model

Microsoft Excel
Year Value gt
1 g1 -0.73%
2 g2 3.56%
3 g3 7.84%
4 g4 12.12%
5 and thereafter g5 16.40%

where:
g1 is implied by PRAT model
g5 is implied by Gordon growth model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= -0.73% + (16.40%-0.73%) × (2 – 1) ÷ (5 – 1)
= 3.56%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= -0.73% + (16.40%-0.73%) × (3 – 1) ÷ (5 – 1)
= 7.84%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= -0.73% + (16.40%-0.73%) × (4 – 1) ÷ (5 – 1)
= 12.12%