Stock Analysis

Should You Investigate West Pharmaceutical Services, Inc. (NYSE:WST) At US$400?

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NYSE:WST
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West Pharmaceutical Services, Inc. (NYSE:WST) received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$471 at one point, and dropping to the lows of US$368. 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$400 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.

See our latest analysis for West Pharmaceutical Services

What is West Pharmaceutical Services worth?

West Pharmaceutical Services is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. 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 48.32x is currently well-above the industry average of 40.38x, 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 does the future of West Pharmaceutical Services look like?

earnings-and-revenue-growth
NYSE:WST Earnings and Revenue Growth February 11th 2022

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. West Pharmaceutical Services' earnings over the next few years are expected to increase by 20%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in WST’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 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 positive outlook is encouraging for WST, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Since timing is quite important when it comes to individual stock picking, it's worth taking a look at what those latest analysts forecasts are. At Simply Wall St, we have the analysts estimates which you can view by clicking here.

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.

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.

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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.

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Further research on
West Pharmaceutical Services

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