As part of our ongoing series here at The Acquirer’s Multiple, each week we focus on one of the stocks from our Stock Screeners, and why it might be a deeply undervalued gem.
The stock this week is:
Westlake Chemical Partners LP (WLKP)
Westlake Chemical Partners is a U.S.-based master limited partnership (MLP) that operates, acquires, and develops ethylene production facilities. The company primarily supports Westlake Corporation through long-term contracts, providing a steady revenue stream insulated from short-term commodity price swings. As a niche player in the commodity chemicals space, WLKP offers investors exposure to essential infrastructure with attractive yield characteristics.
What is IV/P (Intrinsic Value to Price)?
IV/P tells you if a stock is a good deal based on how much value you’re getting for the price you pay.
The Calculation:
It combines a stock’s earning power, growth potential, and what it’s returning to shareholders (via dividends and buybacks) to calculate its Implied Value — what the business is worth based on its fundamentals.
The Interpretation:
- IV/P > 1: You’re getting more value than you’re paying for — a potential bargain.
- IV/P < 1: You’re paying more than the business is worth — possibly overvalued.
If IV/P is very high, it signals the stock might be trading at a deep discount.
IV/P for WLKP: 1.70
WLKP currently has an IV/P of 1.70, meaning the stock’s implied value is estimated to be 1.7 times greater than its current price. Put simply:
For every $1 you invest, you’re potentially getting $1.70 of value.
That indicates a modest but meaningful margin of safety — especially when combined with strong yield metrics.
Supporting Metrics:
- Shareholder Yield: 8.25%
Entirely from dividends — a consistent income stream for unitholders. - Free Cash Flow Yield: 46.10%
This is an exceptionally high FCF yield, signaling massive cash generation relative to market cap.
Why Might WLKP Be Undervalued?
- Limited Investor Coverage
As an MLP with a relatively small market cap (~$805M), WLKP may fly under the radar of larger institutional investors and funds. - Income Vehicle Stigma
MLPs are often seen as income-only plays, and some investors may overlook the impressive free cash flow generation and strategic positioning. - Commodity Label Confusion
While categorized under “commodity chemicals,” WLKP’s long-term contract model reduces exposure to market volatility — a nuance some investors may miss.
Conclusion:
With an IV/P of 1.70, Westlake Chemical Partners LP (WLKP) appears moderately undervalued, particularly for income-seeking or value-oriented investors. Its strong cash generation, steady dividend payout, and niche positioning in a vital part of the chemical supply chain make it worth a closer look. While not a high-growth story, WLKP offers reliability and value — a rare combination in today’s market.
For all the latest news and podcasts, join our free newsletter here.
Don’t forget to check out our FREE Large Cap 1000 – Stock Screener, here at The Acquirer’s Multiple:
