Why Did Western Digital Stock Underperform Despite Revenue Growth?

Western Digital (NASDAQ: WDC) the stock price fell 30% from around $63 at the end of 2019 to nearly $45 currently, mainly due to unfavorable moves in its P/S multiple. This is surprising, as the company experienced an increase in revenue during this period and earnings per share increased, despite a 6% increase in the number of shares outstanding.

In our interactive dashboard, Why Western Digital Stock moved: WDC stock has lost 28% since 2019we break down the factors driving this movement.

WDC’s total revenue increased 14% from $16.6 billion in 2019 to $18.9 billion on an LTM basis

  • WDC’s total revenue consistently hovered below $17 billion between FY2019 and FY21, but ironically it didn’t see a drop in sales due to Covid.
  • Revenues have since risen sharply and currently stand at $18.9 billion on an LTM basis, primarily due to higher sales in East Asian countries.
  • The company derives its sales almost equally from hard-drive-based and flash-based products, both of which account for about half of the company’s $16.9 billion in FY21 sales.
  • For more details on WDC revenue and comparison with peers, see Western Digital Revenue Comparison

Earnings per share increased 7.2% from $56.69 in 2019 to $60.79 currently

  • WDC’s revenue has grown from $16.6 billion in 2019 to $18.9 billion currently, while the number of shares outstanding has increased from 292 million in 2019 to 311 million currently.
  • Because of this, the RPS has gone from $56.69 in fiscal year 2019 to $60.79 currently.

The Price-To-Sales (P/S) multiple for WDC has hovered between 1x and 1.2x from 2019 to 2021, but currently sits at 0.8x, well below its 2019 level

  • Despite WDC’s consistent performance since the end of 2019, its P/S multiple remained stable between 1x and 1.2x until 2021.
  • However, amid the current geopolitical tensions weighing on the broader markets, the P/S multiple has retreated and currently stands at around 0.8x.
  • For more details on the company’s historical returns and comparison with its peers, see Western Digital Stock Returns.

What if you were looking for a more balanced portfolio instead? here is a quality portfolio which has consistently beaten the market since late 2016.

Invest with Trefis Wallets that beat the market

See everything Trefis Price estimates