Is West Pharmaceutical Services Stock a Smart Investment?

NYSE: WST | West Pharmaceutical Services Inc. News, Ratings, and Charts

WST – Medical delivery systems provider West Pharmaceuticals (WST) has retreated slightly over the past month on news of flexibility in the temperature regulations needed to optimize the efficacy of Pfizer’s (PFE) COVID-19 vaccine. However, with a nationwide vaccination program that is now kicking into second gear, optimal transportation and logistics systems will be a necessity. As such, we think WST should rebound in no time. This expectation makes its current price levels a solid entry point for investors seeking to go long in the stock.

Medical packaging, containment and delivery systems developer West Pharmaceutical Services, Inc. (WST) has leveraged its unique logistics system and business channels to remain operational amid the COVID-19 pandemic. As a result, the stock has appreciated 67.1% over the past year. Investors have been bullish on the stock over the past couple of months given the company’s role in COVID-19 vaccine distribution through its diverse packaging and vial containment solutions. WST has gained 4.2% over the past three months because FDA approved vaccines so far require strict storage temperatures to be effective.

However, a February 19 submission by Pfizer, Inc. (PFE) to the FDA regarding its COVID-19 vaccine has raised concerns about  the demand for WST’s distribution services for the vaccine. PFE’s  data demonstrates that the vaccine can remain stable when stored for up to two weeks in pharmaceutical freezers and refrigerators. This revelation caused WST to decline. The stock has lost 7.1% over the past month.

While the FDA has  yet to approve PFE’s request, we believe the following factors will  drive WST’s performance in the near term:

Industry Tailwinds

Even though PFE’s vaccine has demonstrated resilience in slightly higher temperatures than previously recommended, transporting the vaccines from production facilities to different states requires proper packaging and delivery systems. While Moderna’s vaccine can be stored at  relatively higher temperatures compared to PFE’s updated storage requirements, mass distribution from its New Hampshire facility demands third-party services. Thus, WST is expected to play a critical role in the nationwide vaccination drive.

Moreover, with the pandemic promoting the use of telehealth services, foot traffic at traditional clinics has reduced significantly. Drug delivery kiosks and standalone platforms have been gaining popularity in  the transforming healthcare industry. This is because people seem to prefer time-saving online consultations and drug delivery platforms to  waiting in long queues at clinics. Consequently, the drug delivery technology market is expected to grow at a CAGR of 7.7% over the next seven years to hit a market valuation of $8.33 trillion.

Strong Financials

WST has an impressive growth history and high profitability. The company’s revenues have increased at a CAGR of 10.3% over the past three years, while its EBIT has risen at a CAGR of 19% over this period. Its net income and EPS have grown at CAGRs of 32% and 31.9%, respectively, over the past three years.

The company has generated $2.15 billion in revenues over the past year, and $767.80 as gross profit. Its trailing 12-month EBITDA margin and leveraged free cash flow margins of 23.79% and 10.16%, respectively, compare favorably with the respective industry averages. In addition,  WST’s net income margin and ROE of 16.13% and 21.03% are significantly higher than the respective negative industry averages.

Consensus Ratings and Price Target Indicate Potential Upside

Analysts expect WST to hit $328 soon, indicating a potential upside of 19.6%. The stock has an average broker rating of 1.5, which indicates a favorable analyst sentiment. Of six Wall Street analysts that rated the stock, two rated it Strong Buy and two rated it Buy.

POWR Ratings Show Promise

WST has an overall rating of B, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with the weighting of each optimized to improve overall performance.

WST also has a B grade for Growth, Sentiment, Momentum and Quality. This is justified, given the company’s robust price gains and financial performance. Analysts expect a further increase in WST’s financials this year, driven by  global vaccine deployment plans. The company’s EPS is expected to increase 41.6% in the current quarter (ending March 2021), 29.2% in fiscal 2021, and at a rate of 22.6% per annum over the next five years. Consensus revenue estimates represent  a 24.4% rise year-over-year in the current quarter, and 18.4% rise in the current year.

Of the 182 companies in the Medical – Devices & Equipment industry, WST is currently ranked #35. In addition to the grades I’ve highlighted, you can check out other ratings for Value and Stability here.

There are 32 other stocks in this industry with an overall rating of A or B. Click here to see them.

Bottom Line

We think WST’s slight price decline over the past month provides a perfect entry point for investors to profit from  current industry trends. With coronavirus vaccine distribution expected to be critical  until at least the end of the first half of the year, WST should reach new highs soon.

Want More Great Investing Ideas?

“MUST OWN” Growth Stocks for 2021

How to Ride the 2021 Stock Market Bubble

7 Best ETFs for the NEXT Bull Market

5 WINNING Stocks Chart Patterns

 


WST shares were trading at $277.96 per share on Thursday afternoon, down $0.96 (-0.34%). Year-to-date, WST has declined -1.83%, versus a 3.23% rise in the benchmark S&P 500 index during the same period.


About the Author: Aditi Ganguly


Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
WSTGet RatingGet RatingGet Rating
PFEGet RatingGet RatingGet Rating
MRNAGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


Is Goldman Sachs’ 2025 Outlook Correct?

Steve Reitmeister compares his 2025 market outlook to the one just released by Goldman Sachs. There are points of agreement, but biggest disagreement is about where the S&P 500 (SPY) will be at the end of next year. Read on for more...

3 Streaming Stocks Benefiting from Cord-Cutting Trends

As streaming continues to dominate the digital entertainment landscape, the global streaming market presents a lucrative investment opportunity. So, it could be ideal to invest in fundamentally solid streaming stocks Netflix (NFLX), Walt Disney (DIS), and Roku (ROKU). Read further...

3 Gold Stocks to Buy as Safe-Haven Demand Grows

Gold is a stable investment now due to its role as a safe-haven asset during economic uncertainty, rising demand, industrial use, and growth, bolstered by central bank purchases and interest rate cuts. Therefore, investors should consider investing in top gold stocks such as Newmont (NEM), Barrick Gold (GOLD), and Agnico Eagle Mines (AEM). Read more...

3 AI Stocks Transforming Industries and Driving Future Growth

With rapid digitalization, rapid adoption, and development, as well as surging demand, the AI market is on the rise. Amid this backdrop, investors could buy fundamentally solid AI stocks NVIDIA Corporation (NVDA), Microsoft (MSFT), and Meta Platforms (META) poised for substantial gains. Continue reading...

How Much Resistance @ 6,000 for Stocks?

The post-election rally was an exciting burst for the stock market. With that the S&P 500 (SPY) made new highs just above 6,000. Since then stocks have struggled begging the question: what happens next? 44 year investing veteran Steve Reitmeister provides the answers along with his top 11 stocks to buy now.

Read More Stories

More West Pharmaceutical Services Inc. (WST) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All WST News