West Pharmaceutical Services Inc. (NYSE: WST) could make money from the COVID-19 pandemic.
To explain West (WST) manufactures syringes. Healthcare workers need syringes to inject all the coronavirus vaccines on the market today. Moreover, the Pfizer/BioNTech and Moderna (MRNA) vaccines require two injections.
Therefore, West manufactures the delivery system for the most popular product in the world today – COVID-19 vaccines. Moreover, governments plan to spend billions of dollars to manufacture and distribute the vaccines. Hence, the world will need hundreds of millions of syringes, which West makes.
The Demand for Syringes is Enormous
For instance, the US government will contribute up to $4 billion to COVAX, NBC News reports. COVAX is a World Health Organization (WHO) effort to distribute COVID-19 vaccines to 92 countries.
The COVAX effort is in addition to the US government’s push to vaccinate 331 million Americans. President Joe Biden (D-Delaware) wants to vaccinate 300 million Americans by July 2021, The Associated Press reports.
Notably, the federal government will deliver vaccine doses directly to pharmacies, supermarkets, and retail clinics, MarketWatch reports. The hope is to have vaccines and syringes available at 6,500 pharmacies.
The demand for syringes is enormous. UNICEF estimates that 2.5 billion people worldwide need coronavirus vaccinations. Hence, the coronavirus could be good for West Pharmaceutical Services (WST).
Is West Pharmaceutical Services making money?
West Pharmaceutical Services (NYSE: WST) makes some money. It reported a $116.10 million quarterly operating income and a quarterly gross profit of $211.10 on 31 December 2020.
The quarterly operating income grew from $78.10 million on 31 December 2019. The quarterly gross profit grew from $153.2 billion on 31 December 2019.
However, West reported quarterly revenues of just $580.20 million on December 31, 2020. The quarterly revenues grew from $470.60 million on 31 December 2019.
West Pharmaceutical is a growing company. Stockrow estimates West’s revenues grew by 23.29% in the quarter ending on 31 December 2020. The quarterly revenue growth rate rose from 20.15% on 30 September 2020 and 11.38% on 31 December 2019.
Hence, the contention that coronavirus could contribute to West’s growth is true. The company’s revenues grew in the last year.
Is West Pharmaceutical Services Generating Cash?
It is hard to tell if West Pharmaceutical Services (WST) is generating cash because the latest cash figures are from 30 September 2020.
Stock reported no West Pharmaceutical Services cash flow numbers for 31 December 2020. Instead, there was a quarterly operating cash flow of $118.60 million on 30 September 2020. There was a quarterly ending cash flow of $73.59 million on 30 September 2020.
The quarterly operating cash flow rose from $106.40 million on 31 December 2019. The quarterly ending cash flow rose from $43.10 million on 31 December 2019.
Stockrow reported no cash and short-term investments number for West on 31 December 2020. West had $1.238 billion in cash and short-term investments on 30 September 2020.
There was no Total Assets number for West on 31 December 2020. West had $2.583 billion in assets on 30 September 2020. The amount of debt at West could be low, they had $253.40 million in long-term debt on 30 September 2020.
Does Mr. Market West overpay for Pharmaceutical Services (WST)?
I think Mr. Market overpaid for West Pharmaceutical Services (WST) by paying $272.65 on 22 February 2021.
West’s share price grew from $170.16 on 21 February 2020. I see nothing in West’s financial numbers to justify that price. Even with the demand for syringes, COVID-19 creates.
I think demand for syringes and vaccines will grow because the vaccines work. The Verge reports coronavirus cases in Connecticut nursing homes fell from 400 before vaccination in late 2020, to 101 on 2 February 2021 after vaccination. Similarly, the number of COVID-19 deaths in the nursing homes fell from 100 to 35 in the same period.
The Vaccines Work
Furthermore, The Verge claims a modeling study shows the coronavirus death and hospitalization rate could fall by 60% to 70% if they vaccinate 40% of the population. Additionally, studies show the Pfizer/BioNTech and Moderna vaccines work against new variants of coronavirus.
Blood serum samples show the vaccines created enough antibodies in people’s blood to stop the B.1.351 COVID-19 variant from South Africa, The Associated Press reports. “With both the Pfizer and Moderna vaccines, no reduction in vaccine efficacy was found for the B.1.1.7 variant first seen in the U.K.,” researchers reported in the New England Journal of Medicine.
I think demand for vaccines will be high because Coronavirus is still spreading fast. The COVID-19 is still out of control in many areas. Worldometers estimates there had 112.215 million COVID-19 cases and 2.484 million coronavirus deaths worldwide by 22 February 2021.
Americans will pay for the vaccine because Coronavirus estimates the United States suffered 512,230 COVID-19 deaths by 22 February 2021. Plus, they detected 41,414 new coronavirus cases in the United States on 21 February 2021, Worldometers estimated.
Is West a Good Stock?
Thus, I think West’s near future is bright, even though Mr. Market overvalues its stock. The stock has some attraction because it pays a growing dividend.
West paid a 17₵ quarterly dividend on February 3, 2021. That dividend grew from 16₵ on August 5, 2020. Overall, West Pharmaceutical (WST) paid a 66₵ 12-month dividend and a 0.22% dividend yield on 19 February 2020.
I consider West Pharmaceutical an overvalued stock with enormous growth potential. I advise investors to avoid West until Mr. Market fairly values it.