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Opinions Veeral Khatri
West Fraser TimberWFG.TOCOMMENTFeb 28, 2017
Stock price when the opinion was issued
As of Jun 19, 2026. Market Open.
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A name to consider over the next 3-5 years. Overall, an interesting place to be looking, though stocks have been hit so much since the pandemic heyday. Governments are pushing new home builds, and that should help prop up the market. The renovation market will be impeded by people's ability to spend.
WFG’s operating results heavily depend on lumber prices, of course, but the housing sector seems to be recovering and if interest rates peak the sector could do well. WFG is now trading at only 0.9x times' Price/Book. Lumber prices have gone down substantially from the peak in COVID due to a supply and demand mismatch. The company's balance sheet is strong, with net cash of $460M. The company has been repurchasing shares aggressively, which we like. WFG is quite cheap, considering a possible recovery for lumber going forward. The company remains our favourite in the sector, and is well-managed. Interest rates and the N. American economy overall remain the key influences. We would be comfortable starting a position.
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Materials sector. Lumber has been in a sideways consolidation, so an entry here is timely. Add towards the bottom of the trading range. Housing market will pick up later this year or early next, and the lumber names should push higher. Relative strength starting to turn up. Yield is 1.55%.
(Analysts’ price target is $139.44)Premium contentWFG share prices were negatively impacted initially by the announcement of the "indefinite" curtailment of their Florida mill due to lagging lumber demand. The decision is helping to improve earnings and allows management to focus on its key assets. As a result cash reserves are already allowing a sizable buyback of shares. Now analysts expect housing demand for lumber to improve over the balance of the year. It presently trades under book value and under 4x trailing PE. The dividend is backed by a payout ratio under 10% of cash flow. We recommend placing a stop-loss at $95, looking to achieve $140.50 -- upside potential over 20%. Yield 1.6%
(Analysts’ price target is $140.32)
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Lumber stocks have had a good run. SPF prices have gone to $375, which is absolutely insane. Most analysts are factoring in $300 lumber prices, so a $375 lumber price means there is going to be a lot of upward revision which would potentially be positive for this company. He has avoided the space because of the uncertainty around the softwood lumber agreement. It is hard to get a handle on how that is going to shake out, especially with the Trump administration. There is also the potential of some negative backlash from the border adjustment tax. Until there is clarity, this is a space he wants to avoid for the time being. This is a very good company. The largest lumber producer in North America and have very good assets. However, their assets are primarily located in Canada. You could consider Interfor (IFP-T) whose majority of sawmills are in the US and they sell domestically. It could also be a take-out candidate given its size and its ideal positioning in the US south east.