Why Has Western Digital Stock Underperformed Despite Revenue Growth?
Western Digital (NASDAQ: WDC) stock price dropped 30% from around $63 at 2019 end, to almost $45 currently, primarily due to unfavorable changes in its P/S multiple. This comes as a surprise, as the company has witnessed a rise in revenue over this period, and revenue per share has risen, despite a 6% increase in the outstanding share count.
In our interactive dashboard, Why Western Digital Stock Moved: WDC Stock Has Lost 28% Since 2019, we break down the factors behind this move.
(A) WDC’s Total Revenue has grown 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 FY ’19 and FY ’21, but ironically did not witness a drop in sales due to Covid.
- Revenues have since risen strongly, and currently stand higher at $18.9 billion on an LTM basis, driven primarily by rising sales to east Asian countries.
- The company derives its sales almost evenly from HDD-based and flash-based products, both making up roughly half of the company’s $16.9 billion FY ’21 sales.
- For details about WDC revenues and comparison to peers, see Western Digital (WDC) Revenue Comparison
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(B) Revenue per share (RPS) increased 7.2% from $56.69 in 2019 to $60.79 currently
- WDC revenue rose from $16.6 billion in 2019 to $18.9 billion currently, while the outstanding share count increased from 292 million in 2019 to 311 million currently.
- Due to this, RPS has risen from $56.69 in FY ’19 to $60.79 currently.
(C) Price-To-Sales (P/S) multiple for WDC hovered between 1x and 1.2x from 2019 to 2021, but stands at 0.8x currently, much lower than its 2019 level
- Despite WDC’s consistent performance since 2019-end, its P/S multiple stayed steady between 1x and 1.2x till 2021.
- However, amidst current geopolitical tensions dragging down the broader markets, the P/S multiple has pulled back and currently stands at around 0.8x.
- For additional details about the company’s historical returns and comparison to peers, see Western Digital (WDC) Stock Return.
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| Returns | Mar 2022 MTD [1] |
2022 YTD [1] |
2017-22 Total [2] |
| WDC Return | -6% | -26% | -29% |
| S&P 500 Return | -2% | -10% | 92% |
| Trefis MS Portfolio Return | -3% | -12% | 245% |
[1] Month-to-date and year-to-date as of 3/9/2022
[2] Cumulative total returns since the end of 2016
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