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Opinions Bruce Campbell (2)
West Fraser TimberWFG.TOCOMMENTFeb 02, 2021
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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Will the Buy American campaign affect WFT? He expects their coming report to be strong, given the housing boom, including renovations. WFT recently bought Norbord, which signals that they expects this housing boom to last years. All timber stocks are lumpy with returns happening in pockets (either really good returns or bad returns). So, consider lumber a trade and not a buy-and-hold. Buy America: Companies like WFT are changing geographies according to asset ownership from entirely Canada to abroad, including the U.S. Their ticker will change to WFG on the TSX. They likely have some American assets. Potential tariffs on software lumber will continue to be a risk.