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Here's How Much You'd Have If You Invested $1000 in Westlake Chemical a Decade Ago

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For most investors, how much a stock's price changes over time is important. Not only can it impact your investment portfolio, but it can also help you compare investment results across sectors and industries.

Another thing that can drive investing is the fear of missing out, or FOMO. This particularly applies to tech giants and popular consumer-facing stocks.

What if you'd invested in Westlake Chemical (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.


Bottom Line

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.

A $1000 investment made in April 2012 would be worth $3,894.11, or a 289.41% gain, as of April 6, 2022, according to our calculations. Investors should note that this return excludes dividends but includes price increases.

Compare this to the S&P 500's rally of 223.67% and gold's return of 13.22% over the same time frame.

Going forward, analysts are expecting more upside for WLK.

Earnings estimates for Westlake for the first quarter of 2022 have been going up over the past month. The company is expected to benefit from synergies of acquisitions. The Axiall buyout has diversified its product portfolio and geographical operations. The NAKAN acquisition has also allowed the company to boost its compounding business globally. 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. The company should also benefit from its capacity expansion projects. Its strong liquidity position should also allow it to meet its debt obligations.  

 

Over the past four weeks, shares have rallied 10.62%, and there have been 5 higher earnings estimate revisions in the past two months for fiscal 2022 compared to none lower. The consensus estimate has moved up as well.

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