West Pharmaceutical Services, Inc.WSTNYSE

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Strong Sell

Fair Value: $183.60 per share(market-calibrated)

-26.9%

Upside to Fair Value

Current

$251.25

Pure Model

$176.55

Fair Value

$183.60

Bull Case

$214.34

Bear Case

$141.01

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

7.03%

Calibrated Growth

4.01%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $176.55.

What's Driving This Ratingfor WST

↓

CapEx normalizing toward maintenance

Historical CapEx is 10.17% of revenue (heavy investment phase). Model fades this to 3.50% by Year 10, freeing up ~$308M in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 22.87% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.

→

Moderate revenue growth

Analyst consensus projects 5.68% revenue growth, fading to 3.00% by Year 10. Revenue reaches $4.6B (vs $3.1B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $130.04/share (15.5x terminal FCF) while exit multiple gives $223.07/share (34.8x terminal FCF). The 24x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.00% growth is more conservative. The base case averages both methods.

🎯

Market pricing in higher long-term growth

To justify $251.25, the market implies 7.03% perpetual growth — 403bps above the model's 3.00%. This suggests the market sees additional growth catalysts (AI, new products, market expansion) not captured in analyst estimates.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 68.87% indicates efficient cash generation. FCF reaches $873M by Year 10 (18.91% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.19

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)9.86%

Cost of Debt

Pre-tax Cost of Debt1.36%

Tax Rate19.76%

After-tax Cost of Debt1.09%

Equity Weight (E/V)97.76%

Debt Weight (D/V)2.24%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (97.76% × 9.86%) + (2.24% × 1.09%)

= 9.66%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$3.2B	$3.7B	$4.0B	$4.2B	$4.6B
EBIT	$743M	$844M	$921M	$969M	$1.1B
Tax	$147M	$167M	$182M	$192M	$209M
NOPAT	$596M	$677M	$739M	$778M	$847M
+ Depreciation	$149M	$169M	$184M	$194M	$211M
- Capex	$330M	$321M	$290M	$243M	$162M
- Δ NWC	$31M	$44M	$17M	$20M	$24M
Free Cash Flow	$383M	$482M	$616M	$710M	$873M
Discount Factor	0.912	0.758	0.631	0.524	0.398
Present Value	$349M	$366M	$388M	$372M	$347M

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$873M

Terminal Growth Rate3.00%

WACC9.66%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$13.5B

PV of Terminal Value$5.4B

Exit Multiple Method

Year 10 EBITDA$1.3B

Exit Multiple (EV/EBITDA)24.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$30.4B

PV of Terminal Value$12.1B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$3.7B

PV of Terminal Value$5.4B

Enterprise Value$9.0B

(-) Net Debt-$375M

Equity Value$9.4B

Shares Outstanding72M

Price per Share$130.04

Exit Multiple Method

PV of Projected FCFs$3.7B

PV of Terminal Value$12.1B

Enterprise Value$15.8B

(-) Net Debt-$375M

Equity Value$16.1B

Shares Outstanding72M

Price per Share$223.07

Pure Model Fair Value

$176.55

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
7.66%	$213.80	$219.12	$225.59	$233.61	$243.82
8.66%	$190.38	$193.86	$197.96	$202.86	$208.81
9.66%	$171.39	$173.79	$176.55	$179.76	$183.54
10.66%	$155.54	$157.26	$159.20	$161.41	$163.96
11.66%	$142.03	$143.29	$144.70	$146.29	$148.08

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$141.01

-43.9% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 1.49

Base Case

$176.55

-29.7% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 1.19

Bull Case

$214.34

-14.7% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 1.01

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Healthcare Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth5.68%

Year 3 Revenue Growth6.99%

Year 5 Revenue Growth2.44%

Year 7 Revenue Growth2.67%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin22.87%

Tax Rate19.76%

Historical Capex / Rev10.17%

Terminal Capex / Rev3.50%

NWC / Revenue18.05%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 24x EV/EBITDA (Healthcare sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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