Hidden Concerns in Dutch Lady Milk Industries Berhad's Earnings Report

Dutch Lady Milk Industries Berhad's (KLSE:DLADY) recent earnings may not accurately represent its financial performance due to a high accrual ratio and negative free cash flow. The accrual ratio indicates that the company's profit exceeds its free cash flow, and the negative free cash flow suggests that the company's profitability is not sustainable. Shareholders should consider these factors in addition to the company's earnings per share growth of 9.1% in the last year.

Seagate Technology Holdings plc (STX) has announced plans to resume share buybacks in the September quarter, underscoring its confidence in the financial strength and outlook following a strong fiscal 2025 performance. The company reported revenues of $9.1 billion, up 39% year over year, driven by robust nearline demand from cloud customers. Seagate's growth is largely attributed to the ongoing implementation and expansion of its HAMR technology, which aims to increase areal density and support next-generation storage solutions. Non-GAAP operating profit more than tripled to $2.1 billion in fiscal 2025, while free cash flow in the fiscal fourth quarter was $425 million, driven by robust top-line growth and disciplined capital expenditures of 3% of revenues [1].

STX expects cash generation to expand in the back half of calendar 2025, even with a large variable compensation payout in the current quarter. Further, structural changes and a robust product pipeline are expected to drive higher profitability and cash generation in fiscal 2026. With profitability trending higher and mass capacity storage demand accelerating, the company appears well-positioned to balance growth with meaningful capital returns, thereby enhancing shareholder value in fiscal 2026 and beyond. In fiscal 2025, the company distributed nearly 75% of free cash flow through dividends, while paying down gross debt of about $150 million in the fiscal fourth quarter [1].

Western Digital Corporation (WD) is also gaining from rising demand for high-capacity storage driven by cloud computing and generative AI. Both require massive and cost-effective storage backbones that HDDs still provide. WDC’s revenues skyrocketed 51% year over year to $9.5 billion in fiscal 2025. Free cash flow amounted to $675 million in the fiscal fourth quarter, up 139% while annual free cash flow was $1.4 billion. With strong cash flow, a solid balance sheet, and confidence in its business outlook, WDC’s board approved up to $2 billion in share buybacks [1].

Pure Storage (PSTG) recently reported second-quarter fiscal 2026 results with revenues growing 13% to $861 million. Growth was broad-based across the portfolio, driven by strong demand from large enterprises, ongoing momentum in FlashBlade, particularly FlashBlade//E, and accelerating adoption of its core software and services offerings. Free cash flow was $150.1 million compared with $166.6 million in the year-ago quarter. In the fiscal second quarter, the company returned $42 million to its shareholders by repurchasing 0.8 million shares [1].

In the past month, STX shares have gained 9.6% against the Zacks Computer Integrated Systems industry’s decline of 3.5%. In terms of forward price/earnings, STX’s shares are trading at 15.58X, lower than the industry’s 19.97X. The Zacks Consensus Estimate for STX’s earnings for fiscal 2026 has been revised up 4.2% to $10.30 over the past 60 days. Currently, Seagate has a Zacks Rank #3 (Hold) [1].

References:
[1] https://www.tradingview.com/news/zacks:be02fab09094b:0-seagate-resumes-buybacks-amid-rising-free-cash-flow-momentum/