$Westlake (WLK.US)$Revenue has declined in 2019 and 2020, bu...

逍遥投资派 commented on a stock · Feb 15, 2023 22:36

$Westlake (WLK.US)$Revenue has declined in 2019 and 2020, but surged by 57% in 2021. The average annual growth rate over the past 5 years is 18%, similar to the trend of operating profit with an average growth rate of 33% over 5 years and 25% over the past 3 years, while net income has grown by an average of 38% over 5 years and 26% in the recent 3 years.

Revenue increased by 51%, operating profit by 42%, and net income by 47% in the first three quarters of 2022, reaching 2 billion.

Currently, the PE ratio is 8, with a TTM PE ratio dropping to 6.1. If the net income reaches 2.5 billion in 2022, with a 5-year average net income of 1.3 billion, the corresponding PE ratio would be 12. The valuation discount appears significant for a growth stock, while the current valuation seems high for a cyclical stock.

The asset-liability ratio has fluctuated from 55.5% over the past 5 years to 53.8%, dropping to 50% in 2022 Q3.

Interest expenses accounted for 4.9% of operating profit in the first three quarters of 2022, not considered a heavy burden.

The proportion and growth rate of accounts receivable and inventory were relatively normal in 2021, increased faster in the first three quarters of 2022, but the proportions remained relatively normal.

Goodwill and other intangible assets increased from 1.695 billion to 3.604 billion in 2021, driven by a large-scale acquisition. This can explain the recent sharp increase in revenue and profit; however, the sustainability of growth from acquisitions is questionable, but the scale has likely been enhanced.

Long-term loans have been increasing continuously in the past 5 years, reaching 5.3 billion, accounting for 52% of net assets of 10.2 billion, the leverage ratio is not too high.

In the past 5 years, the accumulated operating net amount is 7.94 billion, the accumulated investment net amount is 7.08 billion, with a small amount of shareholder surplus.

Overall, westlake has expanded its scale through mergers and acquisitions, and has increased its gross margin. This improvement should not be due to sector effects. Currently, the TTM P/E ratio is 6.1, so one can choose cautiously (⭐️).

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