Western Digital (WDC) Fair Value & DCF
Score
WDC fair value $541.01. Price $316.16. Price is 42% below fair value.
Worked example
Cash-flow value. Starting free cash flow is $3.57 a share. Year 1 is the first earnings forecast, so it has no growth rate of its own. The forecast then reaches 27.16%, and that pace fades in a straight line to 3% terminal growth by year 10. The discount rate is 12.00% (beta 2.00, capped at 12%). It is beta-adjusted and capped at 12%. The cash-flow value is $491.55 a share.
Earnings value. Next-twelve-months earnings per share of $28.81 times 20.49 is $590.47. The peer group is Computer Hardware, 10 companies worth at least $10 billion. Peer median 21.1. Own 10-year median 19.9. The multiple used is the average of the two, kept between 8 and 30, which is 20.49.
Fair value is the average of the two, $541.01. The price is $316.16, which is 41.6% below fair value.