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US Equities · Finance research note

WDC — Western Digital

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2. Company Fundamentals

2.1 Competitiveness

Metric Value
Operating Margins 37.01%
Profit Margins 55.29%
Return on Equity 85.92%
Return on Assets 14.65%
Free Float 0.34B
Dividend Yield 12.0%
Short Int % Utilisation 10.43%

2.2 Growth

Metric Value
Revenue Growth 45.5%
Free Cash Flow 2.08B
EBITDA 42.62 (Ratio)
Enterprise Value 167.41B
EV/Revenue 14.21
EV/EBITDA 42.62

Revenue growth of 45.5% places the company in a high-growth category.

2.3 Management

Role Metric
Consensus Rating N/A

2.4 Return

Metric Value
Expected Return (Ann.)* 837.63%
Risk / Std Dev (Ann.)* 79.05%
1-Year Price Return* 579.69%

Latest Market Data (as of 2026-08-14, US Eastern time):

Metric Value
Last Price $508.80
52-Week Range $73.14 – $799.87
Observation Count 251 trading days

The return and risk statistics use daily adjusted closes from the retrieved one-year series and annualise daily moments using 252 trading days. The last price is the latest regular-market price reported for the stated date. Source: Yahoo Finance market data.

DuPont Model Analysis

The DuPont model decomposes return on equity (ROE) into three operating and capital-structure drivers:

ROE = Net Margin × Asset Turnover × Equity Multiplier

The comparison uses the latest two comparable annual periods available for the issuer, with reported statement amounts shown in US$. Revenue and net income are income-statement flows; total assets and shareholders’ equity are year-end balance-sheet figures. This is a simplified year-end-balance DuPont comparison rather than an average-balance ROE calculation.

DuPont component Calculation FY2026 FY2025
Revenue Reported revenue $12.92B $9.52B
Net income Reported net income $9.29B $1.84B
Total assets Year-end reported balance $13.86B $14.00B
Shareholders’ equity Year-end reported balance $8.86B $5.54B
Net margin Net income ÷ revenue 71.88% 19.33%
Asset turnover Revenue ÷ total assets 0.9320x 0.6799x
Equity multiplier Total assets ÷ shareholders’ equity 1.5637x 2.5274x
ROE Net margin × asset turnover × equity multiplier 104.76% 33.21%

Source: Yahoo Finance annual statements. Values are based on the two latest comparable annual periods returned by the source; fiscal period labels use the statement period-end year.

2.5 FCFF DCF Valuation

Valuation basis: This research model follows a five-year, unlevered FCFF DCF. It starts from reported annual operating inputs, forecasts revenue and operating cash conversion under an explicit mechanical policy, discounts FCFF at WACC, applies a Gordon-growth terminal value, and bridges enterprise value to an indicative common-equity value per share. It is an analytical estimate rather than a recommendation or personalised target price.

Step 1 — Forecast Operating Profit and NOPAT

Reported operating input Value
Revenue $12.92B
Prior annual revenue $9.52B
EBIT $10.07B
Tax rate 5.00%
NOPAT = EBIT × (1 − tax rate) $9.57B
Forecast start-growth basis 15.00%
Forecast policy latest reported annual revenue growth, bounded to -10.00% / 15.00%

Step 2 — Calculate FCFF

Current FCFF building block Value
NOPAT $9.57B
Add: depreciation & amortisation $375.00M
Less: capital expenditure -$418.00M
Less/(add): working-capital cash-flow movement -$658.00M
Current unlevered FCFF $8.87B

Explicit FCFF forecast

Forecast year Revenue growth NOPAT D&A Capex Change in NWC FCFF Present value
1 15.00% $11.00B $431.25M -$480.70M -$756.70M $10.20B $9.43B
2 11.88% $12.31B $482.46M -$523.95M -$846.56M $11.42B $9.04B
3 8.75% $13.38B $524.68M -$554.76M -$920.63M $12.43B $8.43B
4 5.62% $14.14B $554.19M -$570.08M -$972.42M $13.15B $7.63B
5 2.50% $14.49B $568.04M -$568.04M -$996.73M $13.49B $6.70B

Step 3 — Determine the Discount Rate (WACC)

WACC input Value
Risk-free rate 4.71%
Equity risk premium assumption 5.50%
Beta 2.22
Cost of equity 16.91%
Pre-tax cost of debt 5.73%
WACC 16.84%
WACC validation requires assumption review

Step 4 — Estimate Terminal Value

Terminal-value input Value
Perpetuity growth rate 2.50%
Terminal value $96.46B
Implied terminal EV / EBITDA 6.10x
Terminal value as % of enterprise value 51.80%

Step 5 — Discount Cash Flows to Enterprise Value

Enterprise-value component Value
Present value of explicit FCFF $41.23B
Present value of terminal value $44.30B
Indicated enterprise value $85.53B
Discounting convention mid-year for explicit FCFF; terminal value discounted at year-end five

Step 6 — Convert Enterprise Value to Equity Value

Equity bridge Value
Indicated enterprise value $85.53B
Less: gross interest-bearing debt $1.05B
Add: cash and equivalents $1.58B
Add: affiliate investments $0.00
Less: minority interests $0.00
Indicated common equity value $86.06B

Step 7 — Calculate Indicative Value Per Share

Per-share output Value
Shares used 383,000,000.00
Share-count basis reported diluted weighted-average shares
Current market price $498.66
DCF indicative value per share $224.69
Indicative value vs. market price -54.94%

Model Integrity Checks

Check Result
Perpetuity growth is below the risk-free rate pass
Perpetuity growth is below WACC pass
WACC is within the configured operating-company range review required
Terminal-year FCFF is positive pass
Terminal capex converges to D&A pass
Terminal-value concentration within review band
Implied price differs from spot by more than 30% review required

2.6 Investor-Style Research Screen

Educational screen Result
Buffett-inspired cash-quality checks 3/4 evidenced checks
Lynch-inspired balance-and-growth checks 4/4 evidenced checks

Data lineage: Yahoo Finance public market and reported-statement data; retrieval timestamp: 2026-08-18 17:54:16.685870 UTC; latest reported fiscal period: 2026-06-30 00:00:00. Default assumptions: five-year forecast, mid-year discounting for explicit FCFF, a maximum 2.50% perpetuity-growth rate below both WACC and the risk-free rate, historical operating-ratio persistence, and capex convergence to D&A by year five. No sell-side consensus or management guidance is substituted for reported inputs. This is research and analysis only, not personalized financial advice.

2.7 Quantitative Factor Diagnostics

Model basis: Daily issuer USD excess returns are regressed in-sample using ordinary least squares on matching regional Fama–French factors. FF3 estimates market, size, and value loadings; FF5 adds profitability and investment. Coefficients are descriptive historical exposures, not predictions.

Estimation input Value
Regional factor set US
Factor-return currency USD
Issuer-return basis USD adjusted total return
Estimation window 2025-08-19 to 2026-06-30
Aligned daily observations 217
Minimum observation requirement 120
Currency conversion for HK listings not required

Fama–French Three-Factor and Five-Factor Results

Diagnostic FF3 FF5
Annualised alpha 904.56% 609.22%
Adjusted R² 0.28 0.32
Annualised residual volatility 62.91% 60.87%
Factor loading (t-statistic) FF3 FF5
Market excess return (Mkt-RF) 3.14 (8.49) 2.43 (5.90)
Size (SMB) -1.42 (-2.85) -1.75 (-3.35)
Value (HML) 0.16 (0.36) 0.51 (1.00)
Profitability (RMW) NM -1.61 (-3.69)
Investment (CMA) NM -0.02 (-0.02)

Definitions: Mkt-RF is the market return less the risk-free rate; SMB is small minus big; HML is high minus low book-to-market; RMW is robust minus weak profitability; CMA is conservative minus aggressive investment. Factor returns are sourced from the Kenneth R. French Data Library; issuer adjusted-return history is sourced from Yahoo Finance. For Hong Kong listings, adjusted HKD prices are converted into USD with daily USD/HKD closes before return calculation to match the USD regional factor basis. This is an in-sample historical regression; coefficients and t-statistics do not establish causation or predict future returns. This is research and analysis only, not personalized financial advice.

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