WST Stock: Is There More Steam Left in the Rally?
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WST Stock: Is There More Steam Left in the Rally?

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West Pharmaceutical’s share price has been on an upward trajectory over the past month. Is there more legroom for the stock to keep tracking higher?

After a nearly three-month buildup, shares of healthcare products manufacturer West Pharmaceutical Services (NYSE:WST) rallied over 4% yesterday to nearly $398. The stock has gained nearly 18% over the past month on steadily rising volumes. The question is, can this rally be sustained?

For starters, WST provides injector devices, diagnostics, and contract manufacturing services. Its annual revenue and EPS have hovered around $2.8 billion and $8.6, respectively, over the past two years. Notably, the company’s quarterly EPS has outpaced estimates for eight quarters in a row, and its fourth-quarter results are coming up on February 15.

In October, WST lowered its sales outlook for the full year but raised its bottom line estimates. This year, the company could witness an uptick in non-COVID-19 organic sales and contract manufacturing. Additionally, weak restocking trends at large pharma and generic customers in Q3 could see an improvement. Further, an expected improvement in its margin profile could translate into higher valuation multiples for the company’s stock price.

Additionally, consistent dividends and a payout ratio of 9.7% make WST stock attractive for income investors. Meanwhile, analysts expect WST to post an EPS of $1.78 on $739.5 million in revenue for the fourth quarter. In the comparable year-ago period, WST’s EPS of $1.77 had handily exceeded expectations by $0.39.

What Is the Target Price for WST?

Still, a price-to-earnings multiple of 51.4 means WST shares aren’t exactly inexpensive at current levels. Jefferies’ David Windley, the sole analyst tracking WST at present, has reiterated a Hold rating on the stock alongside a $323 price target.

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