Bill Gunderson

About the Author Bill Gunderson

Bill Gunderson is the CEO and Chief Market Strategist of Gunderson Capital Managment in San Diego, CA. He is also a professional money manager, former research analyst, author of Best Stocks Now, and developer of the Best Stocks Now smartphone app. He offers four free weeks to his weekly Best Stocks Now to Seeking Alpha readers. http://www.pwstreet.com He also hosts a daily stock market radio show on AM1000 KCEO from 7am-8am. http://www.kceoradio.com Bill has appeared on the Fox Business Channel and on Bloomberg radio numerous times. He has been published in Barron's, Forbes, TheStreet.com and numerous other publications i.e. Los Angeles Business Journal, San Diego Union Tribune, Phoenix Business Journal, Salem News, Rochester Business Journal, and many others.

West Pharmaceuticals: A Little Giant In The Pharma Sector


West Pharmaceutical Services (WST) is an example of a good stock in a good sector. I like the health care sector in the current market environment but I prefer companies that are growing at a faster pace than the Eli Lillys (LLY) and Mercks (MRK) of the world. And little giant West Pharmaceutical Services fits the bill.

West Pharmaceuticals was founded way back in 1923 and is headquartered in Exton, Pennsylvania. The company develops systems for the packaging and delivery of injectable drugs. It operates in two segments: Pharmaceutical Packaging Systems and Pharmaceutical Delivery Systems. They make products such as stoppers, seals for vials, closures, and syringe components.

West Pharmaceuticals just reported earnings on October 30th, which gives us some insight into what is going on with the company. Earnings came in at $0.44 per share, in-line with the single earnings estimate. That’s right, there are not too many analysts covering this smaller cap name, only about 3 by my count. Sales came in higher than estimates and company guidance was basically in line with the lower guidance it gave on October 15th due to FX headwinds and tax changes. But all this was good enough to drive the stock up more than 6% on the earnings news, retesting its 52-week high.

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West Pharma stock is benefiting from the strength in health care stocks as well as strong growth in the area of injectable drugs, a global market which is growing at a compounded annual growth rate of 14% per year. And because it services other healthcare companies, it doesn’t carry the same risk as the drug developers themselves. Furthermore, West holds a number of patents for its products and processes. It just recently (October 21) received FDA approval for its Vial2Bag DC device which facilitates the needle-free reconstitution and transfer of drug products between a vial and a standard IV bag or bottle.

West Pharma is also expanding globally, recently opening a plant in India and building a $126 million facility in Waterford, Ireland. That plant will produce packaging components for insulin injector cartridges and other components. By leveraging global sourcing activities and process engineering expertise, the company expects to be able reduce the overall costs of production.

West Pharmaceutical Services reminds me of the pilot fish that swims along in close proximity with the big-pharma sharks. The pilot fish services the shark’s needs protecting it from parasites and even cleaning its teeth and in return it gains protection and lives a less-risky existence. The other interesting thing about the pilot fish is they are actually supposed to taste pretty good. But you don’t see them on too many restaurant menus.

Well let’s take a closer look at this little fish in the sea.

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Data from Best Stocks Now app

As mentioned, West Pharmaceutical Services has a market capitalization of only $3.3 billion, qualifying it as a small-to-mid cap company. Its risk profile is Aggressive and that is where I own the stock, in my Aggressive Growth portfolios.

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Data from Best Stocks Now app

The stock is not exactly cheap, especially given its recent run-up. Its trailing PE is 29 and its forward PE is 23. Given its 14% growth rate, which is the same as the injectable industry, the stock does trade at a premium. It receives a Value Grade of B.

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Data from Best Stocks Now app

West Pharma receives a Momentum and Performance Grade of A-. Over the last 3, 5, and 10 year periods, West has significantly outpaced the returns of the overall market. And looking back at its performance in 2008, as a defensive health care name, it has held up better in down markets as well.

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Data from Best Stocks Now app

Currently West Pharmaceutical Services ranks #51 out of 3900+ stocks in the Best Stocks Now universe. It receives a Stock Grade of A. This is a company that might be on the smaller side, but like the pilot fish it can swim with the sharks and come out unscathed. Just what I am looking for these days in the stock market!

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Bill Gunderson has a total average return of 2.0% and a 49.5% success rate. Gunderson is ranked #1271 out of 3897 bloggers.

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