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West Pharmaceutical (WST) Hits 52-Week High, Can the Run Continue?

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Shares of West Pharmaceutical Services (WST - Free Report) have been strong performers lately, with the stock up 8.6% over the past month. The stock hit a new 52-week high of $465.4 in the previous session. West Pharmaceutical Services has gained 63.9% since the start of the year compared to the 0.8% move for the Zacks Medical sector and the 19.6% return for the Zacks Medical - Dental Supplies industry.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on July 29, 2021, West Pharmaceutical reported EPS of $2.46 versus consensus estimate of $1.74.

For the current fiscal year, West Pharmaceutical is expected to post earnings of $8.22 per share on $2.78 billion in revenues. This represents a 72.69% change in EPS on a 29.56% change in revenues. For the next fiscal year, the company is expected to earn $8.71 per share on $3.04 billion in revenues. This represents a year-over-year change of 5.96% and 9.22%, respectively.

Valuation Metrics

West Pharmaceutical may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.

West Pharmaceutical has a Value Score of D. The stock's Growth and Momentum Scores are B and B, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 56.5X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 73.3X versus its peer group's average of 17.5X. Additionally, the stock has a PEG ratio of 1.99. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, West Pharmaceutical currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if West Pharmaceutical fits the bill. Thus, it seems as though West Pharmaceutical shares could have potential in the weeks and months to come.

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