West Fraser Timber: Undervalued Stock with Strong Growth Potential

27 December 2023 - 1098 views

The projected fair value for West Fraser Timber is CA$210, suggesting the stock is potentially 50% undervalued based on its current share price of CA$105. Analysts have a price target of US$129 for the stock, which is 39% below the projected fair value. However, it’s important to note that these valuations are based on the company’s future cash flows and discounting them to their present value.

[Sentiment: Positive]

West Fraser Timber is projected to have a fair value of CA$210 based on a 2-stage free cash flow to equity analysis. The current share price of CA$105 suggests that the stock may be undervalued by 50%. Analysts have a price target of US$129 for the stock, which is 39% below the estimated fair value.

The intrinsic value of West Fraser Timber is estimated using a discounted cash flow (DCF) model. The model takes into account the company’s future cash flows and discounts them to their present value. The DCF model assumes a two-stage growth period and estimates cash flows for the next ten years. The model also calculates the terminal value based on the Gordon Growth formula.

Based on the DCF analysis, the total equity value of West Fraser Timber is estimated to be US$13 billion. Compared to the current share price, the stock appears to be undervalued by 50%. However, it’s important to note that the DCF analysis is an approximation and doesn’t consider industry cyclicality or future capital requirements.

Overall, based on the estimated fair value and the current share price, West Fraser Timber may present a potential investment opportunity. However, investors should conduct their own analysis and consider other factors before making any investment decisions.