Westlake (WLK): Evaluating Valuation Following Major Debt Refinancing and Capital Structure Shift

Westlake (WLK) has just wrapped up a key refinancing move by issuing two sizable senior unsecured notes and repurchasing a meaningful chunk of its 3.6% Senior Notes due 2026. This step is designed to strengthen its debt maturity profile and optimize capital structure.

See our latest analysis for Westlake.

Despite Westlake’s efforts to shore up its balance sheet, most recently with major refinancing actions and a steady dividend, the market’s been cautious, reflecting in a 1-year total shareholder return of -49.5%. The stock’s momentum has faded considerably in recent months, with the share price closing at $62.56 after sliding more than 19% over the last month alone.

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But with Westlake’s price still hovering well below analyst targets and recent financial moves fresh in mind, should investors see an undervalued opportunity? Or is the market already factoring in all the company’s future growth potential?

Most Popular Narrative: 23.9% Undervalued

With analyst consensus suggesting Westlake’s fair value is well above its current share price, the narrative paints a picture of notable upside, hinging on underlying structural trends and strategic changes. Let’s hear a key perspective that could be driving this outlook.

The multi-year increase in municipal infrastructure spending in the U.S., fueled by the Infrastructure Act and ongoing underspend in water infrastructure, is structurally supporting long-term demand for Westlake’s HIP (Housing and Infrastructure Products) segment, particularly for PVC pipes and fittings, creating a reliable revenue and volume growth driver unaffected by near-term housing volatility.

Read the complete narrative.

Curious how these ambitious projections for long-term growth translate into that aggressive fair value? One of the narrative’s biggest surprises is how it relies on sharply higher future profit margins and analysts’ confidence that current pressures will reverse. Want to know the kind of growth assumptions that underpin those targets? The full narrative breaks down the bold call in detail.

Result: Fair Value of $82.21 (UNDERVALUED)

Have a read of the narrative in full and understand what’s behind the forecasts.

However, ongoing global chemical oversupply and volatile raw material costs could undermine Westlake’s earnings recovery and threaten progress on margin resilience.

Find out about the key risks to this Westlake narrative.

Another View: Sizing Up Value with Multiples

While the fair value estimate points to upside, looking at Westlake’s price-to-sales ratio tells a more nuanced story. Trading at 0.7 times sales puts it above the peer average of 0.5, but still below the US Chemicals industry average of 1.2, and just a shade under its fair ratio of 0.8. That small discount hints at limited margin for error, so is there really as much value here as the consensus suggests?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Westlake Narrative

If you want a different angle or prefer digging into the numbers yourself, you can create your own Westlake narrative in just a few minutes. Do it your way

A great starting point for your Westlake research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your
financial situation. We aim to bring you long-term focused analysis driven by fundamental data.
Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Simply Wall St has no position in any stocks mentioned.

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