We've been asking ourselves recently if the market has placed a fair valuation on Weyerhaeuser Company. Let's dive into some of the fundamental values of this large-cap Real Estate company to determine if there might be an opportunity here for value-minded investors.
A Lower P/E Ratio Than Its Sector Average but Trades Above Its Graham Number:
Weyerhaeuser Company, one of the world's largest private owners of timberlands, began operations in 1900. The company belongs to the Real Estate sector, which has an average price to earnings (P/E) ratio of 24.81 and an average price to book (P/B) ratio of 2.24. In contrast, Weyerhaeuser Company has a trailing 12 month P/E ratio of 19.5 and a P/B ratio of 2.4.
Weyerhaeuser Company's PEG ratio is 5.92, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
Growing Revenues With Increasing Reinvestment in the Business:
| 2020-02-14 | 2021-02-19 | 2022-02-18 | 2023-02-17 | |
|---|---|---|---|---|
| Revenue (MM) | $6,554 | $7,532 | $10,201 | $10,184 |
| Operating Margins | 9.4% | 20.2% | 35.0% | 30.2% |
| Net Margins | -1.16% | 10.58% | 25.56% | 18.46% |
| Net Income (MM) | -$76 | $797 | $2,607 | $1,880 |
| Net Interest Expense (MM) | -$348 | -$346 | -$308 | -$245 |
| Depreciation & Amort. (MM) | -$510 | -$472 | -$477 | -$480 |
| Earnings Per Share | -$0.1 | $1.07 | $3.47 | $1.71 |
| EPS Growth | n/a | 1170.0% | 224.3% | -50.72% |
| Diluted Shares (MM) | 746 | 748 | 751 | 732 |
| Free Cash Flow (MM) | $1,350 | $1,810 | $3,600 | $3,300 |
| Capital Expenditures (MM) | -$384 | -$281 | -$441 | -$468 |
| Net Current Assets (MM) | -$6,618 | -$6,083 | -$3,750 | -$3,845 |
| Current Ratio | 1.6 | 1.69 | 3.29 | 1.58 |
| Long Term Debt (MM) | $6,147 | $5,325 | $5,099 | $4,071 |
| Net Debt / EBITDA | 6.79 | 3.48 | n/a | 1.59 |
Weyerhaeuser Company has growing revenues and increasing reinvestment in the business, exceptional EPS growth, and consistent free cash flow. However, the firm has a highly leveraged balance sheet. Finally, we note that Weyerhaeuser Company has average net margins with a positive growth rate and a decent current ratio.
