West Pharmaceutical Services (WST): Valuation in Focus as Profitability Signals Raise New Investor Concerns

West Pharmaceutical Services (WST) has come under renewed scrutiny after recent commentary called attention to sluggish revenue growth, falling operating margins, and a marked slide in return on invested capital. These signals are sparking debate about the company’s ability to manage costs and sustain long-term profitability.

See our latest analysis for West Pharmaceutical Services.

After a year marked by headline risk and concerns around profitability, the share price has struggled to gain traction, with the latest close at $273.16. Over the last 12 months, the total shareholder return was essentially flat, which points to fading momentum as management grapples with rising costs and softer revenue growth.

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With a flat share price and key financial metrics coming under pressure, the question now is whether West Pharmaceutical Services is attractively undervalued at current levels or if the market has already taken its future prospects into account.

Most Popular Narrative: 13.7% Undervalued

With analysts’ fair value of $316.36 standing notably above the current share price, the latest narrative suggests market expectations are lagging behind bullish future growth drivers for West Pharmaceutical Services.

The continued growth in GLP-1s, which made up about 7% of total revenues in the first quarter, along with the company's ability to capitalize on significant opportunities in this market, could drive revenue and earnings growth. The introduction of an automated line for HVP delivery devices later in 2025 to early 2026 is expected to improve margins by driving operational efficiencies and scale, resulting in enhanced net margins.

Read the complete narrative.

Want to know the secret sauce behind West Pharmaceutical Services’ valuation? The narrative is powered by aggressive growth bets in one category and bold future profit assumptions. Curious how these projections aim to set a new benchmark for the company’s earnings and margins? Dive in to see what makes this forecast so daring.

Result: Fair Value of $316.36 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent demand constraints for HVP components and uncertainty from tariff increases could quickly challenge the company’s projected growth and margin improvements.

Find out about the key risks to this West Pharmaceutical Services narrative.

Another View: Multiples Raise Fresh Questions

Switching from analyst projections to a market-based lens, West Pharmaceutical Services trades at a price-to-earnings ratio of 40.3x, sharply above both the US Life Sciences industry average of 32.2x and a peer average of 23.1x. Notably, the fair ratio estimate sits even lower at 25.4x. This considerable premium suggests the market is pricing in aggressive future growth. However, is the optimism justified, or has risk crept in?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own West Pharmaceutical Services Narrative

If this viewpoint doesn’t quite match your own, or you’d rather dive into the numbers firsthand, you can put together your own analysis in under three minutes with Do it your way.

A good starting point is our analysis highlighting 1 key reward investors are optimistic about regarding West Pharmaceutical Services.

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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.

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