Stock Analysis

Is West Pharmaceutical Services, Inc. (NYSE:WST) Potentially Undervalued?

  •  Updated
NYSE:WST
Source: Shutterstock

West Pharmaceutical Services, Inc. (NYSE:WST) saw significant share price movement during recent months on the NYSE, rising to highs of US$302 and falling to the lows of US$261. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether West Pharmaceutical Services' current trading price of US$278 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at West Pharmaceutical Services’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for West Pharmaceutical Services

Is West Pharmaceutical Services still cheap?

According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 65.89x is currently well-above the industry average of 52.03x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Given that West Pharmaceutical Services’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will West Pharmaceutical Services generate?

earnings-and-revenue-growth
NYSE:WST Earnings and Revenue Growth December 29th 2020

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 48% over the next couple of years, the future seems bright for West Pharmaceutical Services. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? WST’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe WST should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on WST for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for WST, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Diving deeper into the forecasts for West Pharmaceutical Services mentioned earlier will help you understand how analysts view the stock going forward. So feel free to check out our free graph representing analyst forecasts.

If you are no longer interested in West Pharmaceutical Services, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

If you decide to trade West Pharmaceutical Services, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted


What are the risks and opportunities for West Pharmaceutical Services?

West Pharmaceutical Services, Inc. designs, manufactures, and sells containment and delivery systems for injectable drugs and healthcare products in the Americas, Europe, the Middle East, Africa, and the Asia Pacific.

View Full Analysis

Rewards

  • Earnings are forecast to grow 8.79% per year

  • Earnings have grown 34.1% per year over the past 5 years

Risks

No risks detected for WST from our risks checks.

View all Risks and Rewards

Share Price

Market Cap

1Y Return

View Company Report

Further research on
West Pharmaceutical Services

ValuationFinancial HealthInsider TradingManagement Team