Technology stock

Why has Seagate Technology’s inventory doubled since 2018 despite only 7% sales growth?

Seagate Technology (NASDAQ: STX) The stock price has gained 137% from around $38 at the end of 2018 to over $90 currently, mainly due to the favorable development of its P/S multiple. However, the company only saw a 7% increase in revenue during this period, but earnings per share rose, helped by a 23% drop in the number of shares outstanding.

In our interactive dashboard, Why Seagate Technology Stock Moved: STX Stock Has Gained 137% Since 2018we break down the factors driving this movement.

(A) Seagate’s total revenue increased 7% from $11.2 billion in 2018 to $12 billion on an LTM basis

  • Seagate’s total revenue initially fell from $11.2 billion in fiscal 2018 to $10.4 billion in fiscal 2019, primarily due to the glut of supply of semiconductors which hurt selling prices.
  • However, the company’s sales have since recovered, rising steadily to $10.7 billion in FY21 (Seagate’s fiscal year ends in June).
  • Seagate has seen demand increase lately and LTM revenue currently stands at $12 billion, with demand expected to continue to steadily increase in the near future.
  • For more details on Seagate’s earnings and peer comparison, check out Seagate Technology (STX) Revenue Comparison

(B) Earnings per share (EPS) increased by 40% from $38.79 in 2018 to $54.26 currently

  • STX’s revenue has fallen from $11.2 billion in 2018 to $12 billion currently, but the number of shares outstanding has fallen sharply from 288.3 million in 2018 to 220.7 million currently.
  • Because of this, the RPS has gone from $38.79 in fiscal year 2018 to $54.26 currently.

(C) The price-to-sales (P/S) multiple for STX went from 0.8x in fiscal year 2018 to 2.4x in fiscal year 2021, but is back to 1.7x currently, still more than 2x higher than its fiscal 2018 level

  • Due to Seagate’s sales recovery since fiscal 2019, its P/S multiple has steadily increased from 0.8x at the end of 2018 to 2.4x at the end of 2021.
  • However, amid ongoing geopolitical tensions weighing on broader markets, the P/S multiple has retreated and currently stands at around 1.7x, still well above its 2018 level.
  • For more details on the company’s EBITDA and the comparison with its peers, see Seagate Technology (STX) EBITDA comparison.

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Return March 2022
MTD [1]
YTD [1]
Total [2]
Back STX -11% -19% 139%
S&P 500 return 3% -5% 102%
Performance of the Trefis MS portfolio 2% -9% 259%

[1] Cumulative monthly and cumulative annual as of 03/24/2022
[2] Cumulative total returns since the end of 2016

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