Drive manufacturer Seagate (STX) just reported a blow out quarter, saw its FY10 EPS raised 40%, and indicated that demand is likely to outpace supply for most of this year.
Yet, the stock is trading at a PE of just 5, versus its historical PE range of 9 to 13.
The outlook could not be better for STX:
1. STX just reported a record December quarter EPS, is likely to report a record March quarter and CY10 EPS, and just had it's best January ever. 2. Is a leader in an industry that cannot meet demand. 3. Is trading at a FY11 PE which is just half of its historical low end valuation. 4. For the first time in a very long while, its major OEM customers are discussing long term, 1-2 year, purchase contracts. 5. Is just starting to see a revival in its high margin enterprise business. 6. Despite the market correction, STX is one of the few tech stocks trading above its 50 DMA and has seen its money flow index move significantly up over the last 5 weeks. 7. Has been subject to persistent takeover speculation. 8. CEO indicated that STX could be buying back stock this year and is thinking about a way to reward long term investors. 9. Has recently seen investor sentiment shift to it and away from its major competitor.