10 Year Fundamental Analysis of West Pharma - WST
For those of you just putting your toes in the water in the investment world, this is a good example of the long term wealth that can be built in the stock market.
What causes long term wealth? The compounding effect of sales growth through a profitable venture.
The investment world always has to say that the past does not predict the future and that past results are no guarantee of future results. We all intuitively know this, but I thought I would say it anyway.
If you look at revenues from 2005 around the $500 million mark and how it steadily increased to $1.4 billion today AND you look at profit margins, after tax, that were in the 7%-4% range in 2004. and have been over 8% a few times and back down under 6% in 2011: What you can see is that there is no recession in 2008-2009 that the rest of the world seemed to see, so you can conclude that this company has some "recession-proof" factors to it. In other words, the earnings of the company are not tied to the economy in general.
You can also see that the dividend has been raised from 6 cents per quarter on the left side of the chart (back in 2005) and now the dividend is up to 11 cents. Granted, the dividend rate was 24 cents per year with the stock at $12, for a yield of 2%. Now that the stock has quadrupled and the dividend has nearly doubled, the current dividend is 44 cents per year on a $56 stock which is roughly 0.8%.
The marketplace is currently giving a value of this stock where the AFTER-TAX earnings yielded 9% in the past year. How does this compare to the market overall? I can use TradingView to pull up with elements of the S&P500 to find out this information. I will add this later. You can also compare what the yield is on T-Bonds offered by the US Government and other securities to see how they compare.
The beauty of owning a stock over a bond, however, is that as prices rise at the company level, they can raise prices to the customers and stay ahead of the game. If the price level increases, stocks will do far better than bonds in the long, long run. If, however, price levels decline overall, then stocks would suffer and bonds would have an advantage.
To begin your investing career, consider these long term variables and use TradingView to graph out your research.
Many happy "returns".
Tim
1:31PM EST 9/10/2015
What causes long term wealth? The compounding effect of sales growth through a profitable venture.
The investment world always has to say that the past does not predict the future and that past results are no guarantee of future results. We all intuitively know this, but I thought I would say it anyway.
If you look at revenues from 2005 around the $500 million mark and how it steadily increased to $1.4 billion today AND you look at profit margins, after tax, that were in the 7%-4% range in 2004. and have been over 8% a few times and back down under 6% in 2011: What you can see is that there is no recession in 2008-2009 that the rest of the world seemed to see, so you can conclude that this company has some "recession-proof" factors to it. In other words, the earnings of the company are not tied to the economy in general.
You can also see that the dividend has been raised from 6 cents per quarter on the left side of the chart (back in 2005) and now the dividend is up to 11 cents. Granted, the dividend rate was 24 cents per year with the stock at $12, for a yield of 2%. Now that the stock has quadrupled and the dividend has nearly doubled, the current dividend is 44 cents per year on a $56 stock which is roughly 0.8%.
The marketplace is currently giving a value of this stock where the AFTER-TAX earnings yielded 9% in the past year. How does this compare to the market overall? I can use TradingView to pull up with elements of the S&P500 to find out this information. I will add this later. You can also compare what the yield is on T-Bonds offered by the US Government and other securities to see how they compare.
The beauty of owning a stock over a bond, however, is that as prices rise at the company level, they can raise prices to the customers and stay ahead of the game. If the price level increases, stocks will do far better than bonds in the long, long run. If, however, price levels decline overall, then stocks would suffer and bonds would have an advantage.
To begin your investing career, consider these long term variables and use TradingView to graph out your research.
Many happy "returns".
Tim
1:31PM EST 9/10/2015
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