Seagate Technology Holdings PLC (STX, Financial) witnessed a daily gain of 2.67%, resulting in a 3-month gain of 12.88%. However, it reported a Loss Per Share of 2.55. This raises the question: is the stock modestly overvalued? This article aims to provide a detailed valuation analysis of Seagate Technology Holdings PLC (STX) to answer this question. Let's delve into the financials and business operations of the company.
A Snapshot of Seagate Technology Holdings PLC
Seagate Technology Holdings PLC is a leading supplier of hard disk drives for data storage to the enterprise and consumer markets. It forms a practical duopoly in the market with its chief rival, Western Digital, with both companies being vertically integrated. The company's stock price currently stands at $68.17, while its GF Value, an estimation of fair value, is $55.63. This comparison paves the way for a detailed exploration of the company's value.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides a snapshot of the stock's fair trading value. 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.
For Seagate Technology Holdings PLC, the stock is estimated to be modestly overvalued. This suggests that the long-term return of its stock is likely to be lower than its business growth.
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Assessing the Financial Strength of Seagate Technology Holdings PLC
Investing in companies with poor financial strength can lead to a higher risk of permanent loss. The cash-to-debt ratio and interest coverage are great indicators of a company's financial strength. Seagate Technology Holdings PLC has a cash-to-debt ratio of 0.14, which ranks it lower than 92.28% of 2358 companies in the Hardware industry. This indicates that the financial strength of Seagate Technology Holdings PLC is poor.
Profitability and Growth of Seagate Technology Holdings PLC
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. Seagate Technology Holdings PLC has been profitable 9 over the past 10 years. However, its profitability is ranked 7 out of 10, indicating fair profitability.
Growth is a crucial factor in the valuation of a company. Seagate Technology Holdings PLC's growth ranks worse than 94.36% of 1949 companies in the Hardware industry, signaling a decrease in the value of the company.
ROIC vs. WACC
A comparison of the return on invested capital to the weighted average cost of capital provides another measure of a company's profitability. Seagate Technology Holdings PLC's ROIC is 1.17, and its WACC is 9.1, indicating that the company is not creating value for shareholders.
Conclusion
Based on the analysis, Seagate Technology Holdings PLC (STX, Financial) stock is estimated to be modestly overvalued. The company's financial condition is poor, and its profitability is fair. Its growth ranks worse than most companies in the Hardware industry. To learn more about Seagate Technology Holdings PLC stock, check out its 30-Year Financials here.
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