For most investors, how much a stock's price changes over time is important. This factor can impact your investment portfolio as well as help you compare investment results across sectors and industries.
The fear of missing out, or FOMO, also plays a factor in investing, especially with particular tech giants, as well as popular consumer-facing stocks.
What if you'd invested in Westlake Chemical (
WLK Quick Quote WLK - Free Report) ten years ago? It may not have been easy to hold on to WLK for all that time, but if you did, how much would your investment be worth today? Westlake Chemical's Business In-Depth
With that in mind, let's take a look at Westlake Chemical's main business drivers.
Houston, TX-based Westlake Corporation is a global producer and supplier of materials and innovative products. The company, in February 2022, changed its name to Westlake Corporation from Westlake Chemical Corporation to reflect its more diversified business portfolio. The company's range of products includes ethylene, polyethylene, styrene, vinyl intermediates, PVC, PVC Pipe, PVC windows, fence and decking components. The company utilizes most of its internally-produced basic chemicals to make higher value-added chemicals and building products.
The company’s products are used across a range of consumer and industrial markets, including flexible and rigid packaging, automotive products, coatings, water treatment, refrigerants, residential and commercial construction. Westlake generated revenues of around $11.8 billion in 2021.
Westlake has reorganized its reporting segments. Its two newly established reporting segments are Performance and Essential Materials and Housing and Infrastructure Products.
Performance and Essential Materials: The segment includes North American Vinyls, North American Chlor-alkali & Derivatives, European & Asian Chlorovinyls, Olefins, Polyethylene and Epoxy businesses. Performance materials consist of polyethylene, PVC and epoxy while essential materials include caustic soda, styrene, and chlorinated derivative materials. The segment accounted for 74% of total revenues in 2021.
Housing and Infrastructure Products: The unit includes Royal Building Products, Pipe & Fittings, Global Compounds and Dimex. Housing products consist of housing exterior and interior products, residential pipes and fittings and residential PVC compounds while infrastructure products include non-residential pipes and fittings and non-residential PVC compounds. The segment accounted for 26% of total revenues in 2021.
Westlake, in September 2016, concluded the acquisition of chemicals and building products maker, Axiall Corporation in an all-cash deal. The transaction represents an enterprise value of $3.8 billion. Westlake, in January 2019, also acquired global compounding solutions business, NAKAN. The combination complements its existing compounding business.
Putting together a successful investment portfolio takes a combination of research, patience, and a little bit of risk. For Westlake Chemical, if you bought shares a decade ago, you're likely feeling really good about your investment today.
According to our calculations, a $1000 investment made in March 2012 would be worth $3,798.62, or a 279.86% gain, as of March 21, 2022. Investors should keep in mind that this return excludes dividends but includes price appreciation.
The S&P 500 rose 217.85% and the price of gold increased 11.92% over the same time frame in comparison.
Analysts are forecasting more upside for WLK too.
Westlake’s earnings and sales for the fourth quarter beat the respective Zacks Consensus Estimate. The company is expected to benefit from synergies of acquisitions. The Axiall buyout has diversified its product portfolio and geographical operations. Further, the company is seeing favorable demand trends for polyethylene and polyvinyl chloride (PVC) resin. Strong demand in the polyethylene business is likely to continue, especially in food packaging. Also, rising housing starts in the United States augur well for its downstream business and domestic demand for PVC. Westlake should also benefit from its capacity expansion projects. However, it faces headwinds from higher feedstock costs. Its operations are also exposed to turnarounds and outages. Westlake’s olefins business also faces challenges from new capacity additions.
Shares have gained 15.34% over the past four weeks and there have been 5 higher earnings estimate revisions for fiscal 2022 compared to none lower. The consensus estimate has moved up as well.