On Thursday, Deutsche Bank expressed a positive outlook on Westlake Chemical (NYSE:WLK), with an upgrade of the stock's rating from Hold to Buy and an increased price target of $174 from $138. The revised price target suggests a potential upside of 17% for the stock.
Westlake Chemical's shares have demonstrated significant growth over the past year, with a 26% increase, outstripping the S&P 500's 21% rise and the US chemicals sector's 5% gain. This impressive performance has occurred despite what the analyst described as "weak fundamentals" in Westlake's various commodity chains, which include chlor-alkali/PVC, ethylene/polyethylene, and epoxy.
The firm's success has been attributed to the market's focus on Westlake's building products business, which has been a key driver of investor interest. The company's strategic move to acquire Boral (OTC:BOALY)'s North American building products business for $2.15 billion in October 2021 has been a pivotal step. This acquisition effectively doubled the size of Westlake's building products division in North America, allowing the company to establish this branch as a separate business segment.
The analyst highlighted the outperformance of Westlake Chemical's shares despite the challenges faced in its commodity chains. The emphasis on the building products business, particularly following the significant acquisition, has been a major factor in the positive reevaluation of the company's stock by Deutsche Bank.
InvestingPro Insights
Westlake Chemical (NYSE:WLK) has caught the eye of Deutsche Bank, and the numbers from InvestingPro show a mixed financial landscape that investors may want to consider. The company's Market Cap stands at a robust $19.1 billion, indicating its significant presence in the industry. Despite a challenging environment, Westlake Chemical has managed to maintain a P/E Ratio (Adjusted) of 23.46 as of the last twelve months of Q4 2023, which could suggest that the company is potentially undervalued compared to the industry average. Moreover, the company has shown a strong Dividend Growth of 40.06% during the same period, reflecting its commitment to returning value to shareholders.
InvestingPro Tips highlight the importance of looking beyond the surface numbers. For instance, the PEG Ratio of -0.52 suggests that the company's earnings growth might not be keeping pace with its P/E ratio, which could be a point of concern for growth-oriented investors. Additionally, with a Price / Book ratio of 1.86, Westlake Chemical appears to be reasonably valued in terms of its assets. For those considering adding WLK to their portfolio, there are 25 additional InvestingPro Tips available, providing deeper insights into the company's financial health and future prospects.
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