Why Are People Talking About Investing in Westlake (WLK)?

Westlake shares moved -13.15% over the last 52 weeks, with a high of $139.52 and a low of $80.77. During this time, the stock basically tracked the performance of the S&P 500. As of January 2022, the company's 50-day average price is $117.0.

None. The large-cap Industrials company is based in Houston, TX. Westlake has returned a 1.33% dividend yield over the last 12 months.

The Company's Is Growing Its Business With Minimal Leverage:

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%
Net Margins 5.19% 4.4% 17.11% 14.23%
Net Margins Growth n/a -15.22% 288.86% -16.83%
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 Market Is Undervaluing Westlake:

Compared to the Industrials sector's average of 20.49, Westlake has a trailing twelve month P/E ratio of 6.18 and, according to its EPS guidance of 12.38, an expected P/E ratio of 8.78. Westlake's PEG ratio is 0.07 based on its 82.8% annual average growth rate of historical and projected earnings per share. However, we believe that it is more prudent to calculate the PEG ratio using the broader market's 5-year expected EPS growth rate of 13.05%, because the growth rate implied by Westlake's past and expected EPS is probably not sustainable. This more prudent approach shows a PEG ratio of 0.47, which still suggests that company's shares are possibly undervalued.

Furthermore, Westlake is likely undervalued in terms of its equity because its P/B ratio is 1.46 compared to its sector average of 3.78. The company's shares are currently trading -15.32% below their Graham number, implying there is a margin of safety for the stock. The Graham number is calculated according to the formula:

√(22.5 * 5-year average EPS * book value per share) = √(22.5 * 9.39 * 77.97) = $128.35

Most of the Market Indicators on Westlake Are Negative:

17 analysts are following Westlake and have set target prices ranging from $103.0 to $142.0 per share. On average, they have given the company a rating of hold. At the current price of $108.69, WLK is trading -12.1% away from its average analyst target price of $123.65 per share, implying an analyst consensus of some upside potential for the stock.

The company has no information on the number of shares sold short since 8.0% of the company's shares are tied to short positions. Institutions own 29.73% of Westlake's shares, while the insider ownership rate stands at 74.22%. The biggest shareholder is FMR, LLC with a 3% stake in the company worth approximately $390,703,930.

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.