WEST FRASER TIMBER C

WFG
Delayed Quote. Delayed  - 01/20 04:00:00 pm
116.49CAD -3.19%

West Fraser Timber Co. Ltd. : The revival in interest should continue

01/13/2022 | 02:36am
Jordan Dufee
Senior Analyst

Strategy published on : 01/13/2022 | 02:36

long trade
Live

Entry price : 124.18CAD
Target : 160CAD
Stop-loss : 99CAD
Potential : 28.85%

Market participant are once again showing interest in shares in West Fraser Timber Co. Ltd.. The technical chart pattern now appears positive for the short term with new upside potential.
Investors have an opportunity to buy the stock and target the CAD 160.

Summary

● The company has strong fundamentals. More than 70% of companies have a lower mix of growth, profitability, debt and visibility.

● Overall, and from a short-term perspective, the company presents an interesting fundamental situation.

● According to Refinitiv, the company's ESG score for its industry is good.


Strengths

● The company's EBITDA/Sales ratio is relatively high and results in high margins before depreciation, amortization and taxes.

● The group's high margin levels account for strong profits.

● The company is in a robust financial situation considering its net cash and margin position.

● Its low valuation, with P/E ratio at 3.65 and 7.76 for the ongoing fiscal year and 2022 respectively, makes the stock pretty attractive with regard to earnings multiples.

● Given the positive cash flows generated by its business, the company's valuation level is an asset.

● Over the past year, analysts have regularly revised upwards their sales forecast for the company.

● Analysts have consistently raised their revenue expectations for the company, which provides good prospects for the current and next years in terms of revenue growth.

● For the past year, analysts covering the stock have been revising their EPS expectations upwards in a significant manner.

● For the last few months, EPS revisions have remained quite promising. Analysts now anticipate higher profitability levels than before.

● The difference between current prices and the average target price is rather important and implies a significant appreciation potential for the stock.

● The average price target of analysts who are interested in the stock has been strongly revised upwards over the last four months.

● The group usually releases upbeat results with huge surprise rates.


Weaknesses

● The potential for earnings per share (EPS) growth in the coming years appears limited according to current analyst estimates.

● The company is not the most generous with respect to shareholders' compensation.

● The average consensus view of analysts covering the stock has deteriorated over the past four months.

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