SSD Growth Positive for SanDisk Corporation (SNDK), But Where is Value? – Seagate Technology PLC (STX), Western Digital Corp. (WDC)

Western Digital Corp. (NASDAQ:WDC) will unleash the new drives under their Black line and will ship in the 2.5-inch form factor with a thickness of 7mm, which will allow it to fit into thinner notebooks compared to other 2.5-inch, 9.5mm products. There’s also a 5mm version that will be launched in the future, and these drives are expected in 500GB and 1TB capacities at the time of launch.

SanDisk’s relative valuation

SanDisk Corporation (NASDAQ:SNDK)’s revenue per share growth is only 22.01%, compared to WD’s mammoth 283.7% and Seagate Technology PLC (NASDAQ:STX)’s 71.73%.

SNDK Revenue Per Share TTM data by YCharts

SanDisk Corporation (NASDAQ:SNDK)’s ROIC (return on invested capital) stands at 5.07%, compared to Seagate Technology PLC (NASDAQ:STX)’s 51.44% and WD’s 23.11%.

SNDK Return on Invested Capital data by YCharts

It’s crystal clear from the charts presented above why SanDisk’s relative valuation doesn’t appear to be cheap. Western Digital Corp. (NASDAQ:WDC) has a commanding revenue growth, whereas Seagate offers a wider moat. However, given SanDisk’s strong presence in the mobile SD cards market, the valuation seems justified despite being expensive. Don’t forget how the smartphones and tablets are fast replacing the PCs and the Macs.

The verdict

SanDisk is an established player in the smartphone game (high growth market), and it’ll now leverage its expertise in the world of personal and enterprise computing (saturated market). I feel the stock had a decent run-up for the past four quarters, primarily due to the smartphone play. But, transitioning itself for a new business that doesn’t offer growth any more is hardly encouraging for the company. Moreover, valuation doesn’t seem compelling enough. Thus, for me, the stock is a Hold.

The article SSD Growth Positive for SanDisk, But Where is Value? originally appeared on Fool.com and is written by Anindya Batabyal.

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