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Seagate Technology PLC Stock Buy Recommendation Reiterated (STX)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK (TheStreet) -- Seagate Technology (Nasdaq:STX) has been reiterated by TheStreet Ratings as a buy with a ratings score of B. The company's strengths can be seen in multiple areas, such as its notable return on equity, solid stock price performance and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

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Highlights from the ratings report include:

  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Computers & Peripherals industry and the overall market, SEAGATE TECHNOLOGY PLC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The revenue fell significantly faster than the industry average of 10.5%. Since the same quarter one year prior, revenues fell by 20.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • STX's debt-to-equity ratio of 0.75 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.49 is sturdy.
  • SEAGATE TECHNOLOGY PLC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, SEAGATE TECHNOLOGY PLC increased its bottom line by earning $6.45 versus $1.10 in the prior year. For the next year, the market is expecting a contraction of 18.1% in earnings ($5.28 versus $6.45).

Seagate Technology Public Limited Company designs, manufactures, markets, and sells hard disk drives for enterprise storage, client compute, and client non-compute market applications worldwide. Seagate Technology has a market cap of $14.8 billion and is part of the technology sector and computer hardware industry. The company has a P/E ratio of 7.00, below the S&P 500 P/E ratio of 18.00. Shares are up 35.5% year to date as of the close of trading on Monday.

You can view the full Seagate Technology Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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