Unveiling Weyerhaeuser Co (WY)'s Value: Is It Really Priced Right? A Comprehensive Guide
Weyerhaeuser Co (NYSE:WY) experienced a daily loss of -2.19 %, with a 3-month loss of -8.4%. Despite these figures, the company's Earnings Per Share (EPS) stands at 0.96. This article endeavors to answer the question: is Weyerhaeuser Co fairly valued? To answer this, we delve into a comprehensive valuation analysis of the company. We encourage readers to explore the following in-depth analysis.
Company Introduction
Weyerhaeuser Co, one of the world's largest forest product companies, operates three business segments: timberlands, wood products, and real estate. The company's stock price currently stands at $30.35, slightly below the GF Value of $30.82, indicating that the stock might be fairly valued. The following analysis offers a deeper understanding of the company's value, integrating financial assessment with essential company details.
Summarizing GF Value
The GF Value represents the intrinsic value of a stock, calculated based on historical multiples, GuruFocus adjustment factor, and future business performance estimates. The GF Value Line provides an overview of the fair value that the stock should be traded at. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Weyerhaeuser Co (NYSE:WY) appears to be fairly valued based on the GuruFocus Value calculation. At its current price of $30.35 per share, Weyerhaeuser Co has a market cap of $22.20 billion, and the stock appears to be fairly valued. As Weyerhaeuser Co is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength
Investing in companies with poor financial strength can result in a higher risk of permanent capital loss. Thus, it is crucial to review a company's financial strength before deciding to buy its stock. Weyerhaeuser Co has a cash-to-debt ratio of 0.3, which is better than 81.62% of 729 companies in the REITs industry. GuruFocus ranks the overall financial strength of Weyerhaeuser Co at 6 out of 10, indicating fair financial strength.
Profitability and Growth
Companies that have been consistently profitable over the long term offer less risk for investors. Weyerhaeuser Co has been profitable 9 out of the past 10 years. Its operating margin is 15.83%, which ranks worse than 85.78% of 689 companies in the REITs industry. Overall, the profitability of Weyerhaeuser Co is ranked 8 out of 10, indicating strong profitability.
One of the most important factors in the valuation of a company is growth. Companies that grow faster create more value for shareholders. The average annual revenue growth of Weyerhaeuser Co is 16%, which ranks better than 89.62% of 636 companies in the REITs industry.
ROIC vs WACC
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Weyerhaeuser Co's ROIC was 7.35, while its WACC came in at 9.41.
Conclusion
Overall, Weyerhaeuser Co (NYSE:WY) stock appears to be fairly valued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 91.96% of 535 companies in the REITs industry. To learn more about Weyerhaeuser Co stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
