It hasn't been a great evening session for Weyerhaeuser investors, who have watched their shares sink by -1.3% to a price of $29.36. Some of you might be wondering if it's time to buy the dip. If you are considering this, make sure to check the company's fundamentals first to determine if the shares are fairly valued at today's prices.
a Very Low P/E Ratio but Its Shares Are Expensive:
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 27.5 and an average price to book (P/B) ratio of 2.1. In contrast, Weyerhaeuser has a trailing 12 month P/E ratio of 26.7 and a P/B ratio of 2.13.
Weyerhaeuser's PEG ratio is 5.89, 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 (M) | $7,476 | $6,554 | $7,532 | $10,201 | $10,184 | $7,674 |
| Operating Margins | 19% | 10% | 23% | 36% | 30% | 15% |
| Net Margins | 10% | -1% | 11% | 26% | 18% | 11% |
| Net Income (M) | $748 | -$76 | $797 | $2,607 | $1,880 | $839 |
| Net Interest Expense (M) | $375 | $378 | $351 | $313 | $270 | $280 |
| Depreciation & Amort. (M) | $486 | $510 | $472 | $477 | $480 | $500 |
| Diluted Shares (M) | 757 | 746 | 748 | 751 | 743 | 732 |
| Earnings Per Share | $0.99 | -$0.1 | $1.07 | $3.47 | $2.53 | $1.15 |
| EPS Growth | n/a | -110.1% | 1170.0% | 224.3% | -27.09% | -54.55% |
| Avg. Price | $26.61 | $22.23 | $22.72 | $32.11 | $36.27 | $29.36 |
| P/E Ratio | 26.88 | -222.3 | 21.23 | 9.23 | 14.34 | 25.53 |
| Free Cash Flow (M) | $744 | $909 | $1,473 | $3,104 | $2,779 | $1,376 |
| CAPEX (M) | $368 | $57 | $56 | $55 | $53 | $57 |
| EV / EBITDA | 13.83 | 19.47 | 10.11 | 6.61 | 8.85 | 15.07 |
| Total Debt (M) | $6,221 | $6,147 | $5,625 | $5,099 | $6,035 | $5,069 |
| Net Debt / EBITDA | 3.13 | 5.17 | 2.35 | 0.78 | 1.25 | 2.32 |
| Current Ratio | 0.83 | 1.6 | 1.69 | 3.29 | 1.58 | 2.94 |
Weyerhaeuser has generally positive cash flows and an excellent current ratio of 2.94. Additionally, the company's financial statements display positive EPS growth and healthy leverage levels. However, the firm has slight revenue growth and decreasing reinvestment in the business. Finally, we note that Weyerhaeuser has weak operating margins with a stable trend.
