Should You Think About Buying Westlake Corporation (NYSE:WLK) Now?

Today we're going to take a look at the well-established Westlake Corporation (NYSE:WLK). The company's stock led the NYSE gainers with a relatively large price hike in the past couple of weeks. While good news for shareholders, the company has traded much higher in the past year. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today we will analyse the most recent data on Westlake’s outlook and valuation to see if the opportunity still exists.

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What Is Westlake Worth?

Westlake is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Westlake’s ratio of 28.49x is above its peer average of 23.48x, which suggests the stock is trading at a higher price compared to the Chemicals industry. Furthermore, Westlake’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach levels around its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

See our latest analysis for Westlake

Can we expect growth from Westlake?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 28% over the next couple of years, the future seems bright for Westlake. 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? It seems like the market has well and truly priced in WLK’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe WLK 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 WLK 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 positive outlook is encouraging for WLK, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Westlake as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 1 warning sign for Westlake and you'll want to know about this.

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

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.