Is Westlake Corporation (WLK) stock a good buy?
In this article, we review Westlake, to determine if it’s a good buy, sell, or hold.
Westlake manufactures and supplies petrochemicals, polymers, and building products worldwide. The company was founded in 1986 and has office locations in the US, Canada, Japan, China, Korea, Taiwan, Vietnam, France, Spain, Germany, Belgium, The Netherlands, and Italy.
Table of Contents
- Tykr Rating
- Westlake Business Model
- Westlake News
- Westlake Competition
- Westlake 4Ms
- Westlake Financials
- Is Westlake stock a good buy?
- Summary: On Sale
- Score: 100/100
- MOS: 90%
- Share Price: $94
- Sticker Price: $476
How does Westlake make money?
For those of you who have ever seen the show Breaking Bad, think of Walter White’s specialty. No, I’m not talking about crystal meth, I’m talking about chemical engineering. The character was an absolute expert with chemicals. Well in this circumstance, Westlake, is a global expert in chemical engineering.
At a high level, Westlake makes products for food packaging, medical devices, soaps and detergents, car interiors, fashion, toys, shoes, furniture, electronics, siding, stone veneer, windows, outdoor living, roofing, and pipes and fittings.
Here is a more detailed breakdown of their product lines.
- Building Products – This includes siding, soffits, exterior trim and moldings, interior trim and moldings, shutters, mounts, vents, decking materials, composite stone, and roofing.
- Caustic soda – Caustic soda is the chemical compound sodium hydroxide (NaOH). Caustic soda is a common ingredient in the production of many everyday items including soap.
- Chlorine – Chlorine is produced by passing an electric current through salt water or brine. Well known for its disinfecting ability, chlorine is an essential agent in the chemical industry and serves as a building block in thousands of products including drinking water, pools, spas, household disinfectants, food, healthcare, solar energy, plastic foam for construction, smartphones, tablets, and more.
- Dimex – Dimex products include home and office floors, marine dock edging, industrial matting, landscape products, and masonry control joints.
- Epoxy – Epoxy is used to fasten materials together and is found in cars, trucks, wind turbines, electronics, aircrafts, and buildings.
- Olefins – Olefins include polyethylene which is used to create large containers, food containers, and personal care products.
- Pipe & Fittings – Pipe & fittings are used for residential and commercial plumbing, water systems, and agriculture.
- PVC pipes – Polyvinyl chloride (PVC) pipes are found in almost every physical building.
- Water treatment products – Watering treatment products include sanitizers and shock treatment chemicals.
This article from zacks.com lists 5 top-ranked dividend stocks including Group 1 Auto, Westlake, Everest Re, ArcBest, and Cambell Soup.
This article from zacks.com lists Westlake as a #1 strong buy (Zacks has a 1 – 5 rating system). This stock has delivered an unmatched 25% average annual return since 1988 which is more than double the performance of the S&P 500 over the same time period. The consistent strong financials make this a top stock for any portfolio.
This article from zacks.com states that when the market rallies, Westlake should see at least a 37% EPS increase which will result in a significant share price increase. The company has delivered consistently strong financials quarter over quarter and year over year with no signs of slowing down.
This article from investorplace.com lists 3 value stocks to add to your list including Manulife Financial Corp, Western Midstream Partners, and Westlake. Westlake was mentioned because net sales grew 80% year over year and they ended 2021 with $1.7B in free cash which is by far the highest free cash the company has ever seen.
Olin Corporation (OLN)
- Summary: On Sale
- Score: 72/100
- MOS: 65%
- Share Price: $48
- Sticker Price: $106
- Revenue: $8.9B
Schweiter Technologies (SWTQ.SW)
- Summary: Overpriced
- Score: 33/100
- MOS: 0%
- Share Price: CHf981
- Sticker Price: CHf992
- Revenue: CHf1.16B
- Summary: Overpriced
- Score: 39/100
- MOS: 0%
- Share Price: R34,697
- Sticker Price: R35,092
- Revenue: R201B
Formosa Prosonic Industries (9172.KLSE)
- Summary: Watch
- Score: 78/100
- MOS: 0%
- Share Price: RM2.72
- Sticker Price: RM2.75
- Revenue: RM938
MOS: The financials are perfect. A score of 100/100 and MOS of 90% show this stock is running on all cylinders. As of July of 2022, there are only 25 stocks in Tykr with a score of 100/100 and MOS of 90%.
Meaning: This is the definition of a boring business but keep in mind, boring is good. Boring businesses are usually well-established and predictable. In this case, Westlake manufactures essential products that go into a lot of products we use including food packaging, soaps, detergents, fashion, shoes, electronics, and more. This business model isn’t going away anytime soon.
Moat: This is a great sign for Westlake because the competition doesn’t even compare. The financials of the companies listed above are awful in comparison to Westlake.
Management: Albert Chao has served as CEO since 2004. Prior to his role as CEO, he served as President since 1996. Albert and his brother James Chao helped their father T.T. Chao found Westlake in 1986. Albert and James learned a lot from their father, T.T. Chao. T.T. built Taiwan’s first polyvinyl chloride plant in 1954 and in 1964 he founded China General Plastics Group which grew to become one of the largest plastic manufacturers in Asia.
Now let’s take a look at the financials. A wise investor should be able to read the income statement, cash flow statement, and balance sheet and within 60 seconds have a pretty good idea of how the business is performing.
Revenue (Found on the Income Statement)
- 2018: $8.64B
- 2019: $8.12B
- 2020: $7.5B
- 2021: $11.7B
- Revenues declined in 2020 but took off in 2021 which is a great sign.
Net Income (Found on the Income Statement)
- 2018: $996M
- 2019: $421M
- 2020: $373M
- 2021: $2B
- The net income significantly increased in 2021 which is a great sign.
EPS (Found on the Income Statement)
- 2018: 7.66
- 2019: 3.26
- 2020: 2.94
- 2021: 15.69
- The EPS growth has significantly increased in 2021 which is a great sign. This is a major contributor to the MOS of 90%.
Free Cash Flow (Found on the Cash Flow Statement)
- 2018: $707M
- 2019: $514M
- 2020: $772M
- 2021: $1.7B
- Free Cash Flow has significantly increased in 2021 which is a great sign.
Total Assets (Found on the Balance Sheet)
- 2018: $11.6B
- 2019: $12.2B
- 2020: $11.6B
- 2021: $18.4B
- Total Assets have significantly increased in 2021 which is a great sign.
Total Liabilities (Found on the Balance Sheet)
- 2018: $5.5B
- 2019: $6.8B
- 2020: $7.2B
- 2021: $9.9B
- Total Liabilities have increased which is okay.
Total Debt (Found on the Balance Sheet)
- 2018: $2.6B
- 2019: $3.8B
- 2020: $3.5B
- 2021: $5.6B
- Total debt has also increased which is okay.
Total Equity (Found on the Balance Sheet)
- 2018: $5.5B
- 2019: $5.8B
- 2020: $6B
- 2021: $7.9B
- Total Equity has consistently increased which is a great sign.
In this case, all 4M’s pass with flying colors. This is an overall strong company that will most likely be around for the next 10 years and longer. It’s incredible to point out that this stock has delivered 25% annual returns (on average) since 1988. When this market takes off, this stock should deliver some impressive returns. If you’re looking for a boring but essential company to help diversify your portfolio, this stock may be a great option.
The Summary, Score, and MOS of this stock may have changed since the posting of this review. Please login to Tykr to see up-to-date information.
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