Technology stock

Despite stagnant revenue growth, how has Seagate Technology stock outperformed the S&P since 2018?


Seagate Technology (NASDAQ: STX) the share price has more than doubled from $39 at the end of 2018 to over $80 currently, mainly due to the favorable development of its P/S multiple. During this period, the company saw only an 8% increase in revenue, but a substantial drop in the number of shares outstanding helped boost earnings per share and the stock price by the society. Additionally, over the same period, the S&P 500 has returned around 65%, meaning Seagate stock has managed to strongly outperform the broader markets.

In our interactive dashboard, Why Seagate Technology Stock Moved: STX Stock Gained 109% Since 2018we break down the factors driving this movement.

(A) Seagate’s total revenue increased 7.7% from $11.2 billion in fiscal year 2018 to $12 billion on an LTM basis

  • Seagate’s total revenue initially fell from $11.2 billion in fiscal year 2018 to $10.5 billion in fiscal year 2020, as sales volume grew more slowly than growth. lower cost per bit of its memory products (Seagate’s fiscal year ends in June).
  • However, sales have gradually recovered to $10.7 billion in fiscal 2021 and currently stand at $12 billion on an LTM basis.
  • While Seagate presents its business under one operating segment, it is interesting to note that almost 50% of its sales come from Singapore, with the United States and the Netherlands making up the bulk of the rest.
  • For more details on Seagate’s earnings and peer comparison, check out Seagate Technology (STX) Revenue Comparison

(B) Earnings per share (EPS) increased by 43% from $38.79 in 2018 to $55.36 currently

  • Seagate’s revenue has fallen from $11.2 billion in 2018 to $12 billion currently, while the number of shares outstanding has shrunk at a rapid rate, from 288 million in 2018 to less than 220 million currently. .
  • Because of this, the RPS has gone from $38.79 in fiscal year 2018 to $55.36 currently.

(C) Seagate Technology’s price-to-sales (P/S) ratio rose sharply from 0.7x in 2018 to 2.3x at the end of 2021, but fell back to 1.5x currently, still more than 2x above its 2018 level

  • Seagate’s P/S multiple rose sharply to around 2.3x at the end of 2021, driven by rising investor expectations for growth in demand for memory products.
  • However, due to ongoing geopolitical tensions and heightened economic uncertainty weighing on broader markets, the P/S multiple has retreated, currently standing at around 1.5x.
  • For more details on the company’s stock returns and comparison with its peers, see Comparison of Seagate Technology (STX) stock returns.

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Return May 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
Back STX -2% -28% 112%
S&P 500 return -3% -16% 79%
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[1] Monthly and cumulative total as of 10/5/2022
[2] Cumulative total returns since the end of 2016

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