West Pharmaceutical Current Financial Leverage
| WST Stock | USD 390.20 14.85 3.96% |
West Pharmaceutical holds a debt-to-equity ratio of 0.121. At this time, West Pharmaceutical's Short Term Debt is comparatively stable compared to the past year. Long Term Debt Total is likely to gain to about 209.4 M in 2024, whereas Long Term Debt is likely to drop slightly above 69.2 M in 2024. West Pharmaceutical's financial risk is the risk to West Pharmaceutical stockholders that is caused by an increase in debt. In other words, with a high degree of financial leverage come high-interest payments, which usually reduce Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
West Pharmaceutical's liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. West Pharmaceutical's cash, liquid assets, total liabilities, and shareholder equity can be utilized to evaluate how much leverage the Company is using to sustain its current operations. For traders, higher-leverage indicators usually imply a higher risk to shareholders. In addition, it helps West Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect West Pharmaceutical's stakeholders.
For most companies, including West Pharmaceutical, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running West Pharmaceutical Services the most critical issue when dealing with liquidity needs is whether the current assets are properly aligned with its current liabilities. If not, management will need to obtain alternative financing to ensure that there are always enough cash equivalents on the balance sheet in reserve to pay for obligations.
Price Book 9.6557 | Book Value 39.197 | Operating Margin 0.2363 | Profit Margin 0.2012 | Return On Assets 0.1193 |
West |
West Pharmaceutical Financial Leverage Rating
West Pharmaceutical Services bond ratings play a critical role in determining how much West Pharmaceutical have to pay to access credit markets, i.e., the amount of interest on their issued debt. The threshold between investment-grade and speculative-grade ratings has important market implications for West Pharmaceutical's borrowing costs.| Piotroski F Score | 7 Strong |
| Beneish M Score | -2.8 Unlikely Manipulator |
West Pharmaceutical Debt to Cash Allocation
As West Pharmaceutical Services follows its natural business cycle, the capital allocation decisions will not magically go away. West Pharmaceutical's decision-makers have to determine if most of the cash flows will be poured back into or reinvested in the business, reserved for other projects beyond operational needs, or paid back to stakeholders and investors. Many companies eventually find out that there is only so much market out there to be conquered, and adding the next product or service is only half as profitable per unit as their current endeavors. Eventually, the company will reach a point where cash flows are strong, and extra cash is available but not fully utilized. In this case, the company may start buying back its stock from the public or issue more dividends.
The company has 309 M in debt with debt to equity (D/E) ratio of 0.12, which may show that the company is not taking advantage of profits from borrowing. West Pharmaceutical has a current ratio of 3.72, demonstrating that it is liquid and is capable to disburse its financial commitments when the payables are due. Debt can assist West Pharmaceutical until it has trouble settling it off, either with new capital or with free cash flow. So, West Pharmaceutical's shareholders could walk away with nothing if the company can't fulfill its legal obligations to repay debt. However, a more frequent occurrence is when companies like West Pharmaceutical sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for West to invest in growth at high rates of return. When we think about West Pharmaceutical's use of debt, we should always consider it together with cash and equity.West Pharmaceutical Total Assets Over Time
West Pharmaceutical Assets Financed by Debt
Typically, companies with high debt-to-asset ratios are said to be highly leveraged. The higher the ratio, the greater risk will be associated with the West Pharmaceutical's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of West Pharmaceutical, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a a West Pharmaceutical debt ratio should be compared their industry average or other competing firms.West Short Long Term Debt Total
Short Long Term Debt Total |
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Understaning West Pharmaceutical Use of Financial Leverage
West Pharmaceutical financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures West Pharmaceutical's total debt position, including all of outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of West Pharmaceutical assets, the company is considered highly leveraged. Understanding the composition and structure of overall West Pharmaceutical debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business and if it is worth investing in it. Financial leverage can amplify the potential profits to West Pharmaceutical's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of West Pharmaceutical's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets).
| Last Reported | Projected for Next Year | ||
| Short and Long Term Debt Total | 309 M | 227.6 M | |
| Net Debt | -544.9 M | -517.7 M | |
| Short Term Debt | 151.7 M | 159.3 M | |
| Long Term Debt | 72.8 M | 69.2 M | |
| Long Term Debt Total | 186 M | 209.4 M | |
| Short and Long Term Debt | 134 M | 140.7 M | |
| Net Debt To EBITDA | (0.62) | (0.59) | |
| Debt To Equity | 0.11 | 0.10 | |
| Interest Debt Per Share | 4.28 | 2.54 | |
| Debt To Assets | 0.08 | 0.08 | |
| Long Term Debt To Capitalization | 0.05 | 0.05 | |
| Total Debt To Capitalization | 0.1 | 0.09 | |
| Debt Equity Ratio | 0.11 | 0.10 | |
| Debt Ratio | 0.08 | 0.08 | |
| Cash Flow To Debt Ratio | 2.51 | 2.64 |
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Analyzing currently trending equities could be an opportunity to develop a better portfolio based on different market momentums that they can trigger. Utilizing the top trending stocks is also useful when creating a market-neutral strategy or pair trading technique involving a short or a long position in a currently trending equity.When determining whether West Pharmaceutical is a good investment, qualitative aspects like company management, corporate governance, and ethical practices play a significant role. A comparison with peer companies also provides context and helps to understand if West Stock is undervalued or overvalued. This multi-faceted approach, blending both quantitative and qualitative analysis, forms a solid foundation for making an informed investment decision about West Pharmaceutical Services Stock. Highlighted below are key reports to facilitate an investment decision about West Pharmaceutical Services Stock:Check out the analysis of West Pharmaceutical Fundamentals Over Time. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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When running West Pharmaceutical's price analysis, check to measure West Pharmaceutical's market volatility, profitability, liquidity, solvency, efficiency, growth potential, financial leverage, and other vital indicators. We have many different tools that can be utilized to determine how healthy West Pharmaceutical is operating at the current time. Most of West Pharmaceutical's value examination focuses on studying past and present price action to predict the probability of West Pharmaceutical's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move West Pharmaceutical's price. Additionally, you may evaluate how the addition of West Pharmaceutical to your portfolios can decrease your overall portfolio volatility.
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Is West Pharmaceutical's industry expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of West Pharmaceutical. If investors know West will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about West Pharmaceutical listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Quarterly Earnings Growth 0.334 | Dividend Share 0.77 | Earnings Share 7.88 | Revenue Per Share 39.701 | Quarterly Revenue Growth 0.033 |
The market value of West Pharmaceutical is measured differently than its book value, which is the value of West that is recorded on the company's balance sheet. Investors also form their own opinion of West Pharmaceutical's value that differs from its market value or its book value, called intrinsic value, which is West Pharmaceutical's true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because West Pharmaceutical's market value can be influenced by many factors that don't directly affect West Pharmaceutical's underlying business (such as a pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between West Pharmaceutical's value and its price as these two are different measures arrived at by different means. Investors typically determine if West Pharmaceutical is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, West Pharmaceutical's price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.
What is Financial Leverage?
Financial leverage is the use of borrowed money (debt) to finance the purchase of assets with the expectation that the income or capital gain from the new asset will exceed the cost of borrowing. In most cases, the debt provider will limit how much risk it is ready to take and indicate a limit on the extent of the leverage it will allow. In the case of asset-backed lending, the financial provider uses the assets as collateral until the borrower repays the loan. In the case of a cash flow loan, the general creditworthiness of the company is used to back the loan. The concept of leverage is common in the business world. It is mostly used to boost the returns on equity capital of a company, especially when the business is unable to increase its operating efficiency and returns on total investment. Because earnings on borrowing are higher than the interest payable on debt, the company's total earnings will increase, ultimately boosting stockholders' profits.Leverage and Capital Costs
The debt to equity ratio plays a role in the working average cost of capital (WACC). The overall interest on debt represents the break-even point that must be obtained to profitability in a given venture. Thus, WACC is essentially the average interest an organization owes on the capital it has borrowed for leverage. Let's say equity represents 60% of borrowed capital, and debt is 40%. This results in a financial leverage calculation of 40/60, or 0.6667. The organization owes 10% on all equity and 5% on all debt. That means that the weighted average cost of capital is (.4)(5) + (.6)(10) - or 8%. For every $10,000 borrowed, this organization will owe $800 in interest. Profit must be higher than 8% on the project to offset the cost of interest and justify this leverage.Benefits of Financial Leverage
Leverage provides the following benefits for companies:- Leverage is an essential tool a company's management can use to make the best financing and investment decisions.
- It provides a variety of financing sources by which the firm can achieve its target earnings.
- Leverage is also an essential technique in investing as it helps companies set a threshold for the expansion of business operations. For example, it can be used to recommend restrictions on business expansion once the projected return on additional investment is lower than the cost of debt.