West Pharmaceutical-Is WST Stock Undervalued At $200?

Core Viewpoint - West Pharmaceutical Services reported Q4 results that exceeded analysts' expectations for revenue and earnings, but its future guidance fell short, leading to a significant decline in stock price [1][4]. Financial Performance - Q4 revenue reached $749 million, a 2.3% year-over-year increase, with proprietary products sales growing by 3.4% and contract-manufactured products sales declining by 2.5% [3]. - The gross profit margin decreased by 150 basis points to 36.5%, and the operating margin dropped by 10 basis points to 21.7%, impacting earnings which were$ 1.82 per share compared to $1.83 in the prior-year quarter [4]. Stock Performance - WST stock has dropped 43% since the start of 2024, underperforming the S&P 500 index, which gained 28% during the same period [2]. - Following the earnings announcement, WST stock plummeted 38%, with historical annual returns of 66% in 2021, -50% in 2022, 50% in 2023, and -7% in 2024 [5]. Future Guidance - The company projects sales of$ 2.89 billion and adjusted earnings of $6.10 per share for 2025, which is below market expectations of$ 3.04 billion and $7.44, respectively [4]. Valuation Analysis - WST stock is currently trading at around$ 200, at a price-to-sales ratio of 5.1x, compared to its five-year average of 9.2x, indicating it may be undervalued despite lower profit margins and cautious guidance [7].