Despite Stagnant Revenue Growth, How Has Seagate Technology Stock Outperformed The S&P Since 2018?
Seagate Technology (NASDAQ: STX) stock price rose more than 2x from $39 in 2018 end to over $80 currently, primarily due to favorable changes in its P/S multiple. During this period, the company witnessed just an 8% rise in revenue, but a substantial drop in the outstanding share count helped boost the company’s revenue per share and stock price. Further, over the same period, the S&P 500 returned around 65%, meaning that Seagate stock managed to strongly outperform the broader markets.
In our interactive dashboard, Why Seagate Technology Stock Moved: STX Stock Has Gained 109% Since 2018, we break down the factors behind this move.
(A) Seagate’s Total Revenue has grown 7.7% from $11.2 billion in FY 2018 to $12 billion on an LTM basis
- Seagate’s total revenue initially fell from $11.2 billion in FY ’18 to $10.5 billion in FY ’20, as sales volume rose slower than the drop in cost per bit of its memory products (Seagate’s fiscal year ends in June).
- However, sales recovered gradually to $10.7 billion in FY ’21, and currently stand as high as $12 billion on an LTM basis.
- While Seagate reports its business under one operating segment only, it is interesting to note that almost 50% of its sales come from Singapore, with the United States and the Netherlands making up the bulk of the rest.
- For additional details about Seagate’s revenues and comparison to peers, see Seagate Technology (STX) Revenue Comparison
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(B) Revenue per share (RPS) increased 43% from $38.79 in 2018 to $55.36 currently
- Seagate’s revenue rose from $11.2 billion in 2018 to $12 billion currently, while the outstanding share count decreased at a quick rate, from 288 million in 2018 to under 220 million currently.
- Due to this, RPS has jumped from $38.79 in FY ’18 to $55.36 currently.
(C) Price-To-Sales (P/S) multiple for Seagate Technology rose strongly from 0.7x in 2018 to 2.3x by 2021 end, but has pulled back to 1.5x currently, still more than 2x higher than its 2018 level
- Seagate’s P/S multiple rose strongly to around 2.3x by late 2021, on the back of rising investor expectations surrounding memory products demand growth.
- However, due to the current geopolitical tensions and increased economic uncertainty weighing on the broader markets, the P/S multiple has pulled back, currently standing at around 1.5x.
- For additional details about the company stock returns and comparison to peers, see Seagate Technology (STX) Stock Return Comparison.
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| Returns | May 2022 MTD [1] |
2022 YTD [1] |
2017-22 Total [2] |
| STX Return | -2% | -28% | 112% |
| S&P 500 Return | -3% | -16% | 79% |
| Trefis Multi-Strategy Portfolio | -6% | -22% | 205% |
[1] Month-to-date and year-to-date as of 5/10/2022
[2] Cumulative total returns since the end of 2016
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