What’s Behind Seagate Technology Stock’s Outperformance Of The Broader Markets Since 2017?

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STX: Seagate Technology logo
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Seagate Technology

Seagate Technology (NASDAQ: STX) stock price rose around 1.5x from $42 in 2017 end to around $64 currently, primarily due to favorable changes in its revenue per share and P/S multiple. During this period, the company witnessed just a 4% rise in revenue, but a substantial drop in the outstanding share count helped boost the company’s revenue per share, and with a steady rise in the P/S multiple, the company’s stock price has grown. Further, over the same period, the S&P 500 returned a little less than 50%, meaning that Seagate stock managed to narrowly outperform the broader markets.

In our interactive dashboard, Why Seagate Technology Stock Moved: STX Stock Has Gained 52% Since 2017, we break down the factors behind this move.

(A) STX Total Revenue has grown 4.3% from $11.2 billion in FY 2018 to $11.7 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 even higher at $11.7 billion in its most recent FY ’22.
  • While Seagate reports its business under one operating segment only, it is interesting to note that around 45% of its sales come from Singapore, with the United States and the Netherlands making up the rest.
  • For details about Seagate’s EBITDA and comparison to peers, see Seagate Technology (STX) EBITDA Comparison
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(B) Revenue per share (RPS) increased more than 40% from $38.79 in 2018 to $55.77 currently

  • Seagate’s revenue rose from $11.2 billion in 2018 to $11.7 billion currently, while the outstanding share count decreased at a quick rate, from 288.3 million in 2018 to around 210 million currently.
  • Due to this, RPS has jumped from $38.79 in FY ’18 to $55.77 currently.

(C) Price-To-Sales (P/S) multiple for FFIV rose from 0.8x in 2017 to 2.2x by 2021 end but stands much lower at 1.1x currently, still higher than its 2017 level

  • STX P/S multiple rose to around 2.2x by late 2021, on the back of rising investor expectations surrounding memory products demand growth.
  • However, due to the ongoing geopolitical tensions and increased economic uncertainty weighing on the broader markets, the P/S multiple has pulled back strongly, currently standing much lower at around 1.1x.
  • For additional details about the company’s stock returns and comparison to peers, see Seagate Technology (STX) Stock Return Comparison.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

 Returns Sep 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 STX Return -4% -43% 68%
 S&P 500 Return -1% -18% 75%
 Trefis Multi-Strategy Portfolio 0% -16% 236%

[1] Month-to-date and year-to-date as of 9/1/2022
[2] Cumulative total returns since the end of 2016

 

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