WDC

We rate WESTERN DIGITAL CORP (WDC) as a Buy with a composite score of 69.7/100 at a current price of $281.69. The stock scores above average across the majority of our six quantitative factors and ranks #101 out of 7,333 stocks in our universe, reflecting a favorable risk-reward profile.

The rating is primarily driven by strength in momentum (94th percentile) and value (82th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (25th percentile) and stability (39th percentile) tempers our overall conviction. We assign a Narrow Moat rating (56/100), High uncertainty, and Exemplary capital allocation.

Key items to watch: sustainability of the current growth rate. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

WESTERN DIGITAL CORP holds a lower-quartile position (#50 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 69.7/100 places it at rank #101 in our full 7,333-stock universe. With a $64.2B market capitalization, WESTERN DIGITAL CORP operates at meaningful scale within the Manufacturing sector, providing competitive advantages in distribution, procurement, and customer reach.

The near-term outlook is constructive, with revenue growing at 36% and momentum in the 94th percentile confirming positive market sentiment and institutional accumulation. The combination of strong top-line growth and favorable price dynamics suggests the company is executing well on its growth strategy. Investment factor at the 25th percentile indicates reinvestment patterns that investors should monitor for sustainability.

The margin cascade tells an important story: gross margins of 42% (-0.8pp vs sector) narrow to operating margins of 32% (+30.4pp vs sector) and net margins of 37.6%, yielding a gross-to-net conversion rate of 90%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $281.69, WESTERN DIGITAL CORP appears undervalued relative to its fundamentals. Our value factor score of 82/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 23.4x (roughly in line with the sector median of 22.3x), EV/EBITDA of 27.3x (at a premium), P/B of 13.6x, P/S of 9.2x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a High uncertainty rating to WESTERN DIGITAL CORP. Key risk factors include elevated market sensitivity (beta of 1.77), below-average price stability (39th percentile). The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 1.77); below-average price stability (39th percentile). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 39th percentile and quality factor at the 77th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 42% provide a buffer against cost pressures; large-cap scale ($64.2B) provides resilience; a 9.41% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate WESTERN DIGITAL CORP's capital allocation as Exemplary. Management demonstrates a strong track record of balancing reinvestment with shareholder returns, evidenced by returns on equity of 58.2%, a 9.41% dividend yield, best-in-class net margins of 37.6%. Exemplary allocators typically generate returns on equity above 20% while maintaining debt-to-equity below 50% — WESTERN DIGITAL CORP meets this high bar.

The balance sheet remains conservatively managed, providing financial flexibility for opportunistic investments while maintaining a margin of safety for shareholders. The company returns capital via a 9.41% dividend yield, and the combination of 26.5% return on assets and controlled leverage suggests management is deploying capital at rates well above the cost of capital — the hallmark of exemplary stewardship.

In summary, WESTERN DIGITAL CORP receives a Buy rating with a composite score of 69.7/100 (rank #101 of 7,333). Our quantitative framework assigns a Narrow Moat (56/100, trend: stable), High uncertainty, and Exemplary capital allocation. The average factor score across quality, value, momentum, stability, and investment is 63/100.

Our analysis supports a constructive view on WESTERN DIGITAL CORP. The combination of identifiable competitive advantages, high uncertainty, and exemplary capital allocation creates a risk-reward profile that favors accumulation at current levels. We recommend investors consider adding this name to portfolios aligned with the stock's risk profile.