Why Does Westlake (WLK) Get No Love from Analysts?

Westlake may be undervalued with strong growth indicators, but the 18 analysts following the company give it an rating of hold. Their target prices range from $100.0 to $142.0 per share, for an average of $122.33. At today's price of $115.79, Westlake is trading -5.35% away from its average target price, suggesting there is an analyst consensus of some upside potential for the stock. The large-cap Industrials company is based in Houston, TX and has provided a 1.21% dividend yield over the last 12 months.

Westlake has a trailing twelve month P/E ratio of 6.68, compared to an average of 20.49 for the Industrials sector. Based on its EPS guidance of 12.48, the company has a forward P/E ratio of 9.28.

The average annual growth rate of the company's historical and projected earnings per share is 83.0%. On this basis, the company's PEG ratio is 0.08. However, this growth rate is probably not sustainable. In its place we will use the broader market's estimated 5-year EPS growth rate of 13.05%, which gives us a PEG ratio of 0.51. Even with this more conservative assumption on EPS growth, the PEG ratio suggests that Westlake shares are underpriced.

Furthermore, the market is potentially undervaluing Westlake in terms of its book value because its P/B ratio is 1.46. In comparison, the sector average P/B ratio is 3.78. The company's shares are currently -9.79% below their Graham number, indicating that its shares have a margin of safety.

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $8,118 $7,504 $11,778 $15,794
Revenue Growth n/a -7.56% 56.96% 34.1%
Gross Margins 15.52% 13.63% 29.67% 25.79%
Gross Margins Growth n/a -12.18% 117.68% -13.08%
Operating Margins 8.08% 5.72% 23.77% 19.31%
Operating Margins Growth n/a -29.21% 315.56% -18.76%
Earnings Per Share $3.28 $2.58 $15.76 $17.62
EPS Growth n/a -21.34% 510.85% 11.8%
Diluted Shares (MM) 128 128 128 128
Free Cash Flow (MM) $514 $772 $1,736 $2,287
FCF Growth n/a 50.19% 124.87% 31.74%
Capital Expenditures (MM) $787 $525 $658 $1,108
LT Debt to Equity 0.59 0.59 0.65 0.49
The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.