May 11, 2023
Top 10 Stock West Fraser Buy Recommendation
How to read the ranks
For every stock, we judge its performance against its peers and rank it on a scale of 1 to 100. The higher the rank, the better the stock performs than its peers. And, we do this for six investment strategies:
Value - shows how good of a value the stock is. Green is "inexpensive"; red is "expensive".
Growth - shows a company's growth potential. Green is "high growth" expected; red is "tough times ahead".
Safety - relates to the amount of debt a company has. Green is low debt level; red is high debt level.
Combined Financial - this isn't an average of the first three ranks but rather a consolidated view across several financial indicators. Green = good; red = tread carefully.
(NEW) Sentiment - quantifies professional analyst ratings and holdings as well as market pulse. Green = positive sentiment; red = skepticism (Only available to Premium Subscribers).
(NEW) 360° View - the ultimate rating with all financial and non-financial indicators.
Snapshot: West Fraser – Top 10 Stock in Wood & Timber Industry
West Fraser is listed as a top 10 stock on May 11, 2023 in the market index Timber Industry because of its high performance in at least one of the Obermatt investment strategies. Only one consolidated Obermatt Rank is above-average. The company is safely financed, but all other facts speak against a stock purchase, especially the low market sentiment by professional investors. Based on the Obermatt 360° Rank of 68 (high 68% performer), Obermatt assesses an overall buy recommendation for West Fraser on May 11, 2023.
Snapshot: Obermatt Ranks
| Country | Canada |
| Industry | Forest Products |
| Index | Low Waste, Recycling, Timber Industry, TSX Composite |
| Size class | X-Large |
When Obermatt identifies the Top 10 stocks in a market, it’s based on a certain investment strategy. The best performing stocks usually aren’t the ones that everyone is talking about (those are often "over-priced" and have low Value ranks).
For each investment strategy, we provide you with more detailed analysis and our recommendation. You see the ranks of the top 10 stocks ranked by that particular investment strategy (360° View, Sentiment, Value, Growth, Safety and Combined Financial Performance).
360° View: Obermatt 360° Assessment West Fraser Buy
| 360 METRICS | May 11, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 38 |
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| GROWTH | ||||||||
| GROWTH | 49 |
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| SAFETY | ||||||||
| SAFETY | 97 |
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| SENTIMENT | ||||||||
| SENTIMENT | 28 |
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| 360° VIEW | ||||||||
| 360° VIEW | 68 |
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ANALYSIS: With an Obermatt 360° Rank of 68 (better than 68% compared with alternatives), overall professional sentiment and engagement for the stock West Fraser are above average. The 360° Rank is based on consolidating four consolidated indicators, with three out of four metrics below average for West Fraser. The only rank that is above average is the consolidated Safety Rank at 97, which means that the company has a financing structure that is safer than 97% comparable companies when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. But the Value, Growth and Sentiment Ranks are all below average. The consolidated Value Rank has a less desirable rank of 38, which means that the share price of West Fraser is on the high side compared with typical size in indicators such as revenues, profits, and invested capital. The consolidated Growth Rank also has a low rank of 49, which implies that the company exhibits below-average growth momentum when looking at financial metrics such as revenue, profit, and invested capital growth as well as stock returns. Finally, the consolidated Sentiment Rank is also low at a rank of 28, which means that professional investors are more pessimistic about the stock than for 72% of alternative investment opportunities. While Safety is strong, it’s not the most critical indicator, so we suggest proceeding with caution if you are considering this stock. ...read more
RECOMMENDATION: With a 360° Rank of 68, West Fraser is better than 68% of all alternative stock investment opportunities based on the Obermatt Method. As only the financing structure, namely the Safety Rank, is on the safer side and all other consolidated Obermatt Ranks are below-average, this is a riskier stock investment proposition. This is especially the case, since professional investor sentiment, the consolidated Obermatt Sentiment Rank, is also low at 28. The negative market view on West Fraser may be the high stock price (low value) or the low level of growth. This is a problem. As the Safety Rank is the least important of the four, we cannot identify enough positive facts that are visible today to make a case for this stock investment. The company may have a strong future which would justify the high stock price, but this is not visible from investor behavior today. As market sentiment is critical, you should be careful with paying more than market-average for this stock, and conduct further research into the company's future growth potential. Prudent investors may only want to invest a smaller portion of their wealth in such situations. Young investors can carry more risk but should still thrive for sufficient diversification. ...read more
Sentiment Strategy: Professional Market Sentiment for West Fraser only reserved
ANALYSIS: With an Obermatt Sentiment Rank of 28 (better than 28% compared with alternatives), overall professional sentiment and engagement for the stock West Fraser is below industry average. The Sentiment Rank is based on consolidating four sentiment indicators, with three out of four metrics below average for West Fraser. Analyst Opinions are at a rank of 83 (better than 83% of alternative investments), which means that, currently, stock research analysts tend to recommend a stock investment in the company. This is a good sign, were it not for Analyst Opinions Change with a low rank of 8, which means that currently, stock research experts are changing their opinions for the worse. In other words, they are getting more critical of a stock investment in West Fraser. The Professional Investors rank is also low at 30, meaning that professional investors hold less stock in this company than in 70% of alternative investment opportunities. Pros tend to invest in other companies. Even worse, Market Pulse has a low rank of 27, which means that the current professional news and professional social networks are critical of this company (more negative news than for 73% of competitors). ...read more
RECOMMENDATION: With an Obermatt Sentiment Rank of 28 (less encouraging than 72% compared with investment alternatives), West Fraser has a reputation among professional investors that is below that of its competitors. There are several negative sentiment signals, with only the Analyst Opinions Rank above average. This could be a stock with a long reputation for being positive but where things are worsening. Most analysts may not see it yet, but some have, and the professionals are already quite pessimistic. Proceed with caution when investing in this stock. ...read more
Value Strategy: West Fraser Stock Price Value below-average critical
ANALYSIS: With an Obermatt Value Rank of 38 (worse than 62% compared with alternatives), West Fraser shares are more expensive than the average comparable stock. The Value Rank is based on consolidating four value indicators, with half of the indicators below and half above average for West Fraser. Expected dividend yields are higher than 54% of comparable companies (a Dividend Yield rank of 54), making the stock attractive. The same is valid for Price-to-Book Capital (also referred to as market-to-book ratio) with an Obermatt Price-to-Book Rank of 85, which means that the stock price is lower compared with invested capital than for 85% of comparable investments. But in respect to sales and profits, the picture is reversed. Price-to-Sales has a value of 48 which means that the stock price compared with what market professionals expect for future profits is higher than 52% of comparable companies, indicating a low value concerning West Fraser's sales levels. Price-to-Profit (also referred to as price-earnings, P/E) is also unfavorable for West Fraser with a rank of 16. This means that the stock price, compared with what market professionals expect for future profits, is higher than 84% of comparable companies, indicating a low value concerning West Fraser's profit levels. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 38, is a HOLD recommendation based on West Fraser's stock price compared with the company's operational size and dividend yields. The company seems confident that it can generate a reasonable return on invested capital, because it pays an above-average dividend while profits are below what you would expect for a company with this stock price. If you agree with this practice and believe that profits will return to higher levels, as the current dividend policy suggests, West Fraser may be an attractive investment. If this is not the case, you may want to be careful with this stock as it is also expensive compared with its expected revenue levels. ...read more
Growth Strategy: West Fraser Growth Momentum low
ANALYSIS: With an Obermatt Growth Rank of 49 (better than 49% compared with alternatives), West Fraser shows a below-average growth dynamic in its industry. There is limited momentum in this company. The Growth Rank is based on consolidating four value indicators, with half of the indicators below and half above average for West Fraser. Sales Growth has a rank of 92 which means that currently, professionals expect the company to grow more than 92% of its competitors. Capital Growth is also above 6% of competitors with a rank of 71. But Profit Growth only has a rank of 6, which means that currently professionals expect the company to grow its profits less than 94% of its competitors. And Stock Returns have also been below average with a rank of only 31. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 49, is a HOLD recommendation for growth and momentum investors. Profits are sometimes low if the company invests in the future. The positive revenue and capital investment outlook confirms such an interpretation. Both revenues and capital are solid growth indicators, and lower profits in such a case would be encouraging. But the investors see it differently by punishing the share price. Sometimes, Mister Market is not very reliable, because it is not uncommon for it to be volatile. Investors should look out for signs of growth expenditure that could justify low profit growth, and they may also find reasons why recent stock price developments don't confirm the growth outlook of operations. While operating growth indicators are not perfect, they are more reliable indicators for future performance than stock prices that can repeatedly surprise investors. ...read more
Safety Strategy: West Fraser Debt Financing Safety very solid
| SAFETY METRICS | May 11, 2023 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 98 |
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| REFINANCING | ||||||||
| REFINANCING | 59 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 96 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 97 |
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ANALYSIS: With an Obermatt Safety Rank of 97 (better than 97% compared with alternatives) for 2023, the company West Fraser has safe financing practices, which means that their overall debt burden is low. This doesn't mean that the business of West Fraser is safe, it only means that the company is on the safer side regarding possible bankruptcy, assuming that public reporting is correct. The Safety Rank is based on consolidating three financing indicators, where all three are above average for West Fraser. Leverage is at 98, meaning the company has a below-average debt-to-equity ratio. It has less debt than 98% of its competitors. Refinancing is at a rank of 59, meaning that the portion of the debt about to be refinanced is below average. It has less debt in the refinancing stage than 59% of its competitors. Finally, Liquidity is also good at a rank of 96, which means that the company generates more profit to service its debt than 96% of its competitors. ...read more
RECOMMENDATION: With an Obermatt Safety Rank of 97 (better than 97% compared with alternatives), West Fraser has a financing structure that is significantly safer than that of its competitors. These three positive financing indicators signal that the company is less likely to default on its debt obligations. However, it also means that its shareholder returns will be more modest if things go well. A low safety means fewer troubles in downtimes and less upside in good times. ...read more
Combined financial peformance: West Fraser Top Financial Performance
| COMBINED PERFORMANCE | May 11, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 38 |
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| GROWTH | ||||||||
| GROWTH | 49 |
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| SAFETY | ||||||||
| SAFETY | 96 |
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| COMBINED | ||||||||
| COMBINED | 80 |
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ANALYSIS: With an Obermatt Combined Rank of 80 (better than 80% compared with investment alternatives), West Fraser (Forest Products, Canada) shares have much better financial characteristics than comparable stocks. Shares of West Fraser are low in value (priced high) with a consolidated Obermatt Value Rank of 38 (worse than 62% of alternatives) and show below-average growth (Growth Rank of 49) but are safely financed (Safety Rank of 97), which means low debt burdens. ...read more
RECOMMENDATION: An Obermatt Combined Rank of 80, is a strong buy recommendation based on West Fraser's financial characteristics. As the company West Fraser's critical financial metrics exhibit below-average performance, such as low value (Obermatt Value Rank of 38) and low growth (Obermatt Growth Rank of 49), it is a somewhat questionable stock investment, where the risk of paying too much for the shares is significant, unless the company has an exceptionally bright future. In this case, good financing practices (Obermatt Safety Rank of 97) are a positive sign, because it may allow the company to weather challenging times until the hoped-for cash flows materialize. This may be true for high-tech or biotechnology companies with enough cash to sustain prolonged business development. If they own properties that only provide cash flows in the future, the stock may look excessively expensive and unattractive today. In such cases, the Obermatt Method has limited value, as it is based on facts we can observe today. If the facts are all in the future, stock investing becomes guesswork, and this should only be used in a limited number of investments that account for a small fraction of a safe portfolio. ...read more
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