Value Stock: SanDisk Corp. (SNDK)

SanDisk Corporation (SNDK) keeps defying skeptics expecting a tech slowdown as it once again surprised on the Zacks Consensus Estimate for the fourth quarter in a row.

SanDisk manufactures flash memory cards for mobile phones, digital cameras and camcorders, embedded memory for mobile devices, and USB flash drives for consumers and enterprises.

On July 22, the company announced that its founder and CEO Eli Harari would retire on Dec 31, 2010 and will be an advisor to the company for two years after the retirement.

The announcement seemed to cause a ripple amongst investors, but the current President and COO, Sanjay Mehrotra, who was also a co-founder along with Harari, will be stepping in which seems to ensure a smooth transition.

SanDisk Beat By 25.6% in the Second Quarter

On July 22, the company reported its second quarter results and posted yet another big beat of the Zacks Consensus.

Earnings per share were $1.08 compared to the Zacks Consensus of 86 cents. This also bested the second quarter of 2009 which was just 23 cents.

Revenue jumped 61% to $1.18 billion boosted by OEM demand driving record unit and gigabytes sold.

The company is also cash rich, with a cash balance of $3.7 billion. Subtracting company debt, cash on hand still stands at an attractive $2.6 billion.

For the second half of the year, SanDisk sees strong demand from its customer base. Half of all revenue now comes from outside the United States.

Zacks Consensus Estimates Jump

Given the 22 cent surprise in the quarter, it’s not surprising that analysts are full year estimates.

For 2010, 5 estimates jumped in the last 7 days as the Zacks Consensus rose by 22 cents to $3.80 per share. Analysts now expect earnings per share growth of 135%.

Things get a bit more dicey for 2011, however. Analysts are skeptical about whether the demand can continue.

They expect earnings to decline 6.2% in 2011. The Zacks Consensus stands at just $3.56 per share, with 3 estimates moving higher and 1 going lower in that time period.

Value Fundamentals

SanDisk is a value play with a forward P/E of just 11.2. Its industry trades with a P/E of 15.3.

The company has an attractive price-to-book ratio of 2.1 which is just slightly under the industry at 2.3.

Its return on equity is an excellent 22.2%, easily crushing the industry’s average of 11.8%.

SanDisk is a Zacks #1 Rank (strong buy) stock.

SANDISK CORP (SNDK): Free Stock Analysis Report

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About Tracey Ryniec 60 Articles

Affiliation: Zacks Investment Research

Tracey Ryniec is the Value Stock Strategist for She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at

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