June 8, 2023
Top 10 Stock West Fraser Strong 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 Low Waste Leaders
West Fraser is listed as a top 10 stock on June 08, 2023 in the market index Low Waste because of its high performance in at least one of the Obermatt investment strategies. Two consolidated Obermatt Ranks are above-average. While the company shows high growth, the stock price is high yet professional investor sentiment is low, which may be due to overly optimistic investor behavior, reflected in a low stock price value. Based on the Obermatt 360° View of 76 (top 76% performer), Obermatt assesses an overall strong buy recommendation for West Fraser on June 08, 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 Strong Buy
| 360 METRICS | June 8, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 44 |
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| GROWTH | ||||||||
| GROWTH | 61 |
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| SAFETY | ||||||||
| SAFETY | 97 |
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| SENTIMENT | ||||||||
| SENTIMENT | 38 |
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| 360° VIEW | ||||||||
| 360° VIEW | 76 |
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ANALYSIS: With an Obermatt 360° View of 76 (better than 76% compared with alternatives) for 2023, overall professional sentiment and engagement for the stock West Fraser are very positive. The 360° View is based on consolidating four consolidated indicators, with half of the metrics below and half above average for West Fraser. The consolidated Growth Rank has a good rank of 61, which means that the company experiences above-average growth momentum when looking at financial metrics such as revenue, profit, and invested capital growth as well as stock returns. This means that growth is higher than for 61% of competitors in the same industry. In addition, the consolidated Safety Rank has a safer rank of 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 consolidated Value Rank has a less desirable rank of 44 which means that the share price of West Fraser is on the higher side compared with typical size in indicators such as revenues, profits, and invested capital. This means that the stock price is higher than for 56% of alternative stocks in the same industry. The consolidated Sentiment Rank also has a low rank of 38, which means that professional investors are more pessimistic about the stock than for 62% of alternative investment opportunities. ...read more
RECOMMENDATION: With a 360° View of 76, West Fraser is better positioned than 76% of all alternative stock investment opportunities based on the Obermatt Method. As only half of the consolidated Obermatt Ranks exhibit excellent performance, the picture is ambiguous. Growth is above-average (Growth Rank of 61), and the company is safely financed (Safety Rank of 97). However, professional market sentiment is low(Sentiment Rank of 38). The negative market view on West Fraser may be due to the high stock price (low value). A growth company like this may get too expensive at one point in time. If too many investors are desperate to board the train, they may drive stock prices above reasonable levels. It is typical for growth companies to have low value ratings, because investors are willing to pay more for companies that outperform their competitors. So the question is, how much more do you pay for the stock of West Fraser compared with alternatives? You can use the following rule of thumb: The value rank shouldn’t be lower than one hundred minus the growth rank. For example, if the growth rank is at 75, and the value rank is at 5, you should tread carefully. If the value rank is at 40, it still might be a good value if the value rank is above 60. As market sentiment is low, you should be careful with paying more than market-average for this stock and conduct further research into the company’s future growth potential. ...read more
Sentiment Strategy: Professional Market Sentiment for West Fraser only reserved
ANALYSIS: With an Obermatt Sentiment Rank of 38 (better than 38% 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 85 (better than 85% 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 21, 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 33, which means that the current professional news and professional social networks are critical of this company (more negative news than for 67% of competitors). ...read more
RECOMMENDATION: With an Obermatt Sentiment Rank of 38 (less encouraging than 62% 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 44 (worse than 56% 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 for 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 a Price-to-Book Rank of 87, which means that the stock price is lower compared with invested capital than for 87% of comparable investments. But in respect to sales and profits, the picture is reversed. Price-to-Sales is 49 which means that the stock price compared with what market professionals expect for future profits is higher than for 51% of comparable companies, indicating a low value concerning West Fraser's sales levels. The Price-to-Profit ratio (also referred to as price-earnings (P/E) ratio) is also unfavorable for West Fraser with a rank of 17. This means that the stock price, compared with what market professionals expect for future profits, is higher than for 83% 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 44, 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 good
ANALYSIS: With an Obermatt Growth Rank of 61 (better than 61% compared with alternatives), West Fraser shows an above-average growth dynamic in its industry. Investors also speak of positive momentum. 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 90 which means that currently, professionals expect the company to grow more than 90% of its competitors. Capital Growth is also above 14% of competitors with a rank of 67. But Profit Growth only has a rank of 14, which means that currently professionals expect the company to grow its profits less than 86% of its competitors. And Stock Returns have also been below average with a rank of only 41. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 61, is a BUY 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 | June 8, 2023 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 98 |
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| REFINANCING | ||||||||
| REFINANCING | 53 |
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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 53, meaning that the portion of the debt about to be refinanced is below average. It has less debt in the refinancing stage than 53% 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 | June 8, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 44 |
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| GROWTH | ||||||||
| GROWTH | 61 |
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| SAFETY | ||||||||
| SAFETY | 96 |
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| COMBINED | ||||||||
| COMBINED | 82 |
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ANALYSIS: With an Obermatt Combined Rank of 82 (better than 82% 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 44 (worse than 56% of alternatives). But they show above-average growth (Growth Rank of 61) and are safely financed (Safety Rank of 97, which means below-average debt burdens). ...read more
RECOMMENDATION: An Obermatt Combined Rank of 82, is a strong buy recommendation based on West Fraser's financial characteristics. Investors looking for growth and low financial risk may find this stock attractive. While the company West Fraser exhibits low value (Obermatt Value Rank of 44), which means that the stock price is rather high, it also demonstrates above-average growth (Obermatt Growth Rank of 61). This is a typical case, as high-growth companies are often expensive. Good financing practices (Obermatt Safety Rank of 97) are a double-edged sword: if the company continues growing, low debt limits shareholder returns. But if the company increases its debt, it will also increase risk. In other words, this is an investment on the safer side, despite the above-average price (low value). ...read more
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