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.
Weyerhaeuser Company's Valuation Is in Line With Its Sector Averages:
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 36.4 and a P/B ratio of 2.26.
Weyerhaeuser Company's PEG ratio is 6.21, 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.
The Company's Revenues Are Declining:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $7,476 | $6,554 | $7,532 | $10,201 | $10,184 | $7,723 |
| Operating Margins | 19% | 10% | 23% | 36% | 30% | 15% |
| Net Margins | 10% | -1% | 11% | 26% | 18% | 8% |
| Net Income (MM) | $748 | -$76 | $797 | $2,607 | $1,880 | $631 |
| Net Interest Expense (MM) | $375 | $378 | $351 | $313 | $270 | $274 |
| Depreciation & Amort. (MM) | $486 | $510 | $472 | $477 | $480 | $494 |
| Free Cash Flow (MM) | $744 | $909 | $1,473 | $3,104 | $2,779 | $1,255 |
| Capital Expenditures (MM) | $368 | $57 | $56 | $55 | $53 | $57 |
| Net Current Assets (MM) | -$6,601 | -$6,618 | -$5,971 | -$3,750 | -$3,845 | -$4,306 |
| Long Term Debt (MM) | $5,419 | $6,147 | $5,325 | $5,099 | $4,071 | $4,818 |
| Net Debt / EBITDA | 3.2 | 5.61 | 2.53 | 0.8 | 0.98 | 2.79 |
Weyerhaeuser Company has average net margins with a stable trend, positive expected EPS Growth, and irregular cash flows. In addition, we note significant leverage. Furthermore, the firm has weak revenue growth and decreasing reinvestment in the business.
