Critical Review: Western Digital (WDC) versus Xyratex (XRTX)

Western Digital (NASDAQ: WDC) and Xyratex (NASDAQ:XRTX) are both technology companies, but which is the better investment? We will contrast the two companies based on the strength of their analyst recommendations, institutional ownership, dividends, risk, profitability, valuation and earnings.

Valuation & Earnings

This table compares Western Digital and Xyratex’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Western Digital $19.09 billion 1.25 $397.00 million $4.79 16.89
Xyratex N/A N/A N/A ($0.77) N/A

Western Digital has higher revenue and earnings than Xyratex. Xyratex is trading at a lower price-to-earnings ratio than Western Digital, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Western Digital and Xyratex’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Western Digital 7.38% 26.48% 10.09%
Xyratex N/A N/A N/A

Dividends

Western Digital pays an annual dividend of $2.00 per share and has a dividend yield of 2.5%. Xyratex does not pay a dividend. Western Digital pays out 41.8% of its earnings in the form of a dividend.

Institutional & Insider Ownership

83.8% of Western Digital shares are owned by institutional investors. 0.3% of Western Digital shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current ratings and target prices for Western Digital and Xyratex, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Western Digital 0 8 22 1 2.77
Xyratex 0 0 0 0 N/A

Western Digital currently has a consensus target price of $113.96, indicating a potential upside of 40.85%.

Summary

Western Digital beats Xyratex on 10 of the 11 factors compared between the two stocks.

Western Digital Company Profile

Western Digital Corporation (Western Digital) is a developer, manufacturer and provider of data storage devices and solutions that address the needs of the information technology (IT) industry and the infrastructure that enables the proliferation of data in virtually every industry. The Company’s portfolio of offerings addresses three categories: Datacenter Devices and Solutions (capacity and performance enterprise hard disk drives (HDDs), enterprise solid state drives (SSDs), datacenter software and system solutions); Client Devices (mobile, desktop, gaming and digital video hard drives, client SSDs, embedded products and wafers), and Client Solutions (removable products, hard drive content solutions and flash content solutions). The Company develops and manufactures a portion of the recording heads and magnetic media used in its hard drive products.

Xyratex Company Profile

Xyratex Ltd (Xyratex) is a provider of data storage technology, including modular solutions for the enterprise data storage industry and hard disk drive (HDD) capital equipment for the HDD industry. Xyratex operates in two segments: Networked Storage Solutions (NSS) and Storage Infrastructure (SI). Its NSS products are primarily HDD based data storage subsystems and solutions, which it provides to original equipment manufacturers. Its SI products consist of HDD manufacturing process equipment, which it sells directly to manufacturers of HDDs and their component suppliers. Its product and solution portfolio for the enterprise data storage industry includes storage enclosures, integrated application platforms and high performance computing (HPC) data storage solutions. In April 2014, Seagate Technology PLC completed the acquisition of Xyratex Ltd.

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