Westlake Chemical Corporation (NYSE:WLK), which is in the chemicals business, and is based in United States, saw significant share price movement during recent months on the NYSE, rising to highs of $69.99 and falling to the lows of $56.1. 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 Westlake Chemical's current trading price of $60.6 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Westlake Chemical’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Westlake Chemical still cheap?
Good news, investors! Westlake Chemical is still a bargain right now. My valuation model shows that the intrinsic value for the stock is $116.53, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that Westlake Chemical’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Westlake Chemical look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -8.7% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Westlake Chemical. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Although WLK is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to WLK, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping an eye on WLK for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Westlake Chemical. You can find everything you need to know about Westlake Chemical in the latest infographic research report. If you are no longer interested in Westlake Chemical, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.