Should You Invest In Westrock After Its Recent Move?

by Trefis Team
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Westrock Co (NYSE:WRK) has climbed 19% in the last 5 trading days, whereas the S&P 500 barely moved. Does this mean that an investment decision is on the cards? Well, it may very well be. We think that Westrock could make for a good investment candidate at this point. We arrive at our conclusion by assessing Westrock’s recent market movement from two perspectives::

  1. Relative positioning in the market
  2. Underlying financial trends

Our dashboard Big Movers: Westrock Company Moved 19% – What Next? lays this out.

What relative positioning suggests: Are you a value investor who identifies and invests in under-priced securities based on market comparisons? Then this might be important to you.

Westrock Company’s stock price decreased -23.8% this year, from $41.81 to $31.87, before moving 19% in the last week, and ending at $37.92. So this appears to be a meaningful trend reversal. But is it going to last? Let’s see what trailing PE multiples have to say. This figure decreased -14.9% to 10.6, before ending at 12.6 after last week’s move. Compared to the year’s beginning, the multiple is just about at the same level. But this is an incomplete picture without peer comparison. Compared to Westrock Company’s P/E multiple of 12.6, the figures for its peers Packaging Corp of America and Crown Holdings stand at 20.7 and 20.5 respectively, suggesting potential for upside remains for Westrock’s stock.

What fundamentals suggest: Want to consider long term investment? Then pay attention here.

Westrock Company’s stock price increased 19% in the last week. In comparison, the stock has decreased -26% between 2017 and 2019, and has decreased -33.3% between 2017 and now. This again suggests reversal in a dominant trend. Can the underlying financials justify a sustained rebound?

Westrock Company’s revenue has increased 23.1% from $14,860 Mil in 2017 to $18,289 Mil in 2019. For the last 12 months, this figure stood at $17,759 Mil, implying a decrease of -2.9% over 2019 numbers. That’s not a sharp decrease given how the global economy has fared during the pandemic. This suggests that the company can get back to a pre-pandemic growth trajectory easily as the demand rebounds. But what about its margins? We note that Westrock Company’s net margins have remained more or less at the same level of 4.7% for the last few years, except for a temporary jump in 2018. For the last 12 months, this figure stood at 4.4% suggesting a reasonable consistency in profitability.

Taking both perspectives together, there certainly seems to be some upside to Westrock. But, what if you could invest in a winning portfolio? Here’s a top-quality portfolio to outperform the market, with over 100% return since 2016, versus 55% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently.

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