Today we're going to take a look at the well-established West Pharmaceutical Services, Inc. (NYSE:WST). The company's stock saw significant share price movement during recent months on the NYSE, rising to highs of US$420 and falling to the lows of US$291. 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$302 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.
What is West Pharmaceutical Services worth?
The stock is currently trading at US$302 on the share market, which means it is overvalued by 27% compared to my intrinsic value of $237.04. This means that the opportunity to buy West Pharmaceutical Services at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since West Pharmaceutical Services’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of West Pharmaceutical Services look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 27% 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? It seems like the market has well and truly priced in WST’s positive outlook, with shares trading above its fair value. 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 its real value 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 true value, which means there’s no 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.
If you want to dive deeper into West Pharmaceutical Services, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 1 warning sign with West Pharmaceutical Services, and understanding this should be part of your investment process.
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.
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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.
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.
Flawless balance sheet with questionable track record.