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WDC

Peter Lynch Guru Analysis for Western Digital Corporation

$101.7
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Exchange: NASDAQ
Industry: Technology
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Assessments & Analysis Based on November 20, 2014 close price: $101.77

  for the P/E/Growth Investor based on the criteria of Peter Lynch. Return to WDC Guru Analysis

All Star Guru Scorecard

Source Go Chart %
Peter Lynch 91%
Benjamin Graham 57%
Validea 29%
Motley Fool 35%
David Dreman 57%
Martin Zweig 46%
Kenneth Fisher 68%
James P. O'Shaughnessy 40%



Detailed Analysis

Guru Score: 91%


Determine the Classification:

WDC is considered a "True Stalwart", according to this methodology, as its earnings growth of 19.42% lies within a moderate 10%-19% range and its annual sales of $15,269 million are greater than the multi billion dollar level.This methodology looks for the "Stalwart" securities to gain 30%-50% in value over a two year period if they can be purchased at an attractive price based on the P/E to Growth ratio. WDC is attractive if WDC can hold its own during a recession.


Inventory To Sales: [PASS]

When inventories increase faster than sales, it is a red flag. However an increase of up to 5% is considered bearable if all other ratios appear attractive. Inventory to sales for WDC was 7.74% last year, while for this year it is 8.1%. Since inventory has been rising, this methodology would not look favorably at the stock but would not completely eliminate it from consideration as the inventory increase (.36%) is below 5%.


Yield adjusted P/E to Growth (PEG) ratio: [PASS]

The Yield-adjusted P/E/G ratio for WDC (.76), Based on the average of the 3, 4 and 5 year historical EPS growth rates, is O.K.


EARNINGS PER SHARE: [PASS]

The EPS for a stalwart company must be positive. WDC's EPS ($6.39) would satisfy this criterion.


Total Debt/Equity Ratio: [PASS]

This methodology would consider the Debt/Equity ratio for WDC (26.84%) to be acceptable (equity is three to ten times debt). This ratio is one quick way to determine the financial strength of the company.


FREE CASH FLOW: [NEUTRAL]

The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for WDC (7.83%) is too low to add to the attractiveness of the stock. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria.


NET CASH POSITION: [NEUTRAL]

Another bonus for a company is having a Net Cash/Price ratio above 30%. Lynch defines net cash as cash and marketable securities minus long term debt. According to this methodology, a high value for this ratio dramatically cuts down on the risk of the security. The Net Cash/Price ratio for WDC (20.8%) is too low to add to the attractiveness of this company. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria.

 
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