STX – Market expectations are for Uniform ROA to fade, management may also have concerns about profitability, macro uncertainty, and storage capacity

April 12, 2022

  • Seagate Technology Holdings plc (STX) currently trades below corporate but around historical averages relative to Uniform earnings, with a 15.5x Uniform P/E (Fwd. V/E’).

  • At these levels, markets are pricing in expectations for Uniform ROA to fade to 8%, accompanied by 3% Uniform asset growth.

  • Meanwhile, analysts expect Uniform ROA to improve to 11% in 2023, accompanied by immaterial Uniform asset shrinkage.

  • If sustained going forward, these levels would imply a stock price closer to $136.18, representing approximately 49.05% equity upside for the firm.

  • That said, the firm’s most recent earnings call suggests management may have concerns about profitability, macro uncertainty, and storage capacity.

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