Seagate Technology PLC (STX), Western Digital Corp. (WDC): Looking For Big Gains in Technology? Remember Memory

Another name but this time the opposite story

While the stories of Seagate and Western Digital Corp. (NASDAQ:WDC) tell the tale of two businesses where the growth and prosperity of the past seem to have quickly faded into a slow and difficult future, the story of SanDisk Corporation (NASDAQ:SNDK) appears to weave a diametrically opposed version of a business coming out of a slow period and about to surge forward in the next generation of technology advancements. SanDisk is a major manufacturer of flash drives that can be embedded or portable, and due to the lack of moving parts are more conducive to use in mobile devices requiring data storage.

At first glance, SanDisk Corporation (NASDAQ:SNDK) might appear to be far more expensive than our other two prospects based upon the P/E ratios of 15.41 and 13.54 against 2013 & 2014 projected earnings, but the 5-year projected growth rate for its earnings of 17.6% per year reveal it to be the least expensive of the three. Also, given the superiority of its products for use in portable devices that can be jostled around during use, the products would seem to be better suited for the overall future direction of the market. If the share price simply rises to keep pace with the projected earnings growth rate, investors will attain phenomenal returns in this stock over the next several years.

Final thoughts and actions

While I do believe the predictions of the “death of the PC” are overly dramatic and at least premature, I do agree that Western Digital and Seagate are at best facing slow forward growth prospects and difficult market conditions for their products. Given the fundamentals and current valuations, I do not believe these two businesses present and acceptable risk/reward ratio to justify my capital. SanDisk, however, offers almost everything I look for in a long-term investment and looks poised to deliver exceptional annual returns for the next 5 years.

Ken McGaha has no position in any stocks mentioned. The Motley Fool owns shares of Western Digital.

The article Looking For Big Gains in Technology? Remember Memory originally appeared on Fool.com and is written by Ken McGaha.

Ken is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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