February 15, 2024
Top 10 Stock West Fraser Hold 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 Recycling Leaders
West Fraser is listed as a top 10 stock on February 15, 2024 in the market index Recycling because of its high performance in at least one of the Obermatt investment strategies. Two consolidated Obermatt Ranks are above-average. The company is safely financed and the professional investor sentiment is positive. Both are encouraging signals for a stock purchase decision, albeit at an above-average share price. Based on the Obermatt 360° View of 46 (46% performer), Obermatt assesses an overall hold recommendation for West Fraser on February 15, 2024.
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° View West Fraser Hold
| 360 METRICS | February 15, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 40 |
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| GROWTH | ||||||||
| GROWTH | 15 |
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| SAFETY | ||||||||
| SAFETY | 96 |
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| SENTIMENT | ||||||||
| SENTIMENT | 50 |
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| 360° VIEW | ||||||||
| 360° VIEW | 46 |
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ANALYSIS: With an Obermatt 360° View of 46 (better than 46% compared with alternatives), overall professional sentiment and financial characteristics for the stock West Fraser are below the industry average. The 360° View is based on consolidating four consolidated indicators, with half below and half above average for West Fraser. The consolidated Sentiment Rank has a good rank of 50, which means that professional investors are more optimistic about the stock than for 50% of alternative investment opportunities. It also rates well regarding its financing structure, with the consolidated Safety Rank at 96 or better than 96% of its peers when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. But the stock is expensive and expects low growth. The consolidated Value Rank is only 40, meaning that the share price of West Fraser is on the high side, compared with indicators such as revenues, profits, and invested capital. The company exhibits below-average growth momentum when looking at financial metrics such as revenue, profit, invested capital growth,and stock returns, with its Growth Rank at 15. ...read more
RECOMMENDATION: With a consolidated 360° View of 46, West Fraser is worse than 54% of all alternative stock investment opportunities based on the Obermatt Method. As only half of the consolidated Obermatt Ranks exhibit excellent performance, namely the positive professional market sentiment (Sentiment Rank of 50) and safe financing practices (Safety Rank of 96), the case for investing in this stock needs further thought. The Value and the Safety Ranks are below average. The Safety Rank is the least critical of the four consolidated ranks, because it only reflects financing practices. So the question is: How to assess below-average value against above-average sentiment? This may be a case where growth is in the future, not yet reflected in current performance. Companies that might fall into this category are those with intellectual property, such as technology and pharmaceutical companies. In early phases, they are expensive relative to their size and have a lot of capital on their books, as is the case here. Investors expect a better future and are willing to pay a higher price than is warranted by the current company size. These higher prices drive stock price value down in the short term. In this case, future growth may be the strongest driver of the investment case, reflected by institutional investors' opinions. With a weak Value Rank, the question is how much to sacrifice value at the cost of positive sentiment. Sometimes market sentiment is just hype, but sometimes it is right. You pay more than market-average for this stock, but it may be worth it, if the future of West Fraseṛ is bright. 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 positive
ANALYSIS: With an Obermatt Sentiment Rank of 50 (better than 50% compared with alternatives), overall professional sentiment and engagement for the stock West Fraser is above average. The Sentiment Rank is based on consolidating four sentiment indicators, with half of the indicators below and half above average for West Fraser. Analyst Opinions are at a rank of 91 (better than 91% of alternative investments), which means that currently, stock research analysts tend to recommend a stock investment in the company. Market Pulse is also positive with a rank of 57, which means that the current professional news and professional social networks are positive when discussing this company (more positive news than for 57% of competitors). But Analyst Opinions Change is negative with a below 50 rank of 36, which means that stock research experts are changing their opinions for the worse in recommending the company. In other words, they are getting more critical of investments in West Fraser. There are also only so many institutional investors holding company stock with a Professional Investors rank of 16, which means that, currently, professional investors hold less stock in this company than in 84% of alternative investment opportunities. Pros tend to invest in other companies. ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 50 (more positive than 50% compared with investment alternatives), West Fraser has a reputation among professional investors that is above-average compared with that of its competitors. The signals are ambivalent. The positive news in the market contradicts the negative change in analyst recommendations. Since the overall analyst recommendations are still above average, the stock may be safer for investing, especially if it is not an extra-large company where Pros tend to be less present. In such a case, the Pro Investor rank is not a problem. ...read more
Value Strategy: West Fraser Stock Price Value below-average critical
ANALYSIS: With an Obermatt Value Rank of 40 (worse than 60% compared with alternatives), West Fraser shares are more expensive than the average comparable stock. The Value Rank is based on consolidating four value indicators, where three out of four indicators are above average for West Fraser. Price-to-Sales (P/S) is 50 which means that the stock price compared with what market professionals expect for future sales is lower than for 50% of comparable companies, indicating a good value for West Fraser's revenue size. The same is valid for the Price-to-Book Capital ratio (also referred to as market-to-book ratio) with a Price-to-Capital Rank of 85. Finally, compared with other companies in the same industry, dividend yields of West Fraser are expected to be higher than for 65% of all competitors (a Dividend Yield rank of 65). The only low rank is for expected profits with a Price-to-Profit Rank of 17, indicating that the market expects the company's profit to be low despite a high dividend. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 40, is a hold recommendation based on West Fraser's stock price compared with the company's operational size and dividend yields. The low Profit Rank could result from a one-off charge, for instance, for an accident, a legal settlement, or a restructuring project. If the company keeps its dividends high, the low expected profit may be transitory. If that is the case, the three good value ranks for Sales, Capital, and Dividends are reliable indicators for good stock price value, a low stock price. ...read more
Growth Strategy: West Fraser Growth Momentum negative
| GROWTH METRICS | February 15, 2024 | |||||||
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| REVENUE GROWTH | ||||||||
| REVENUE GROWTH | 16 |
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| PROFIT GROWTH | ||||||||
| PROFIT GROWTH | 18 |
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| CAPITAL GROWTH | ||||||||
| CAPITAL GROWTH | 59 |
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| STOCK RETURNS | ||||||||
| STOCK RETURNS | 31 |
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| CONSOLIDATED RANK: GROWTH | ||||||||
| CONSOLIDATED RANK: GROWTH | 15 |
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ANALYSIS: With an Obermatt Growth Rank of 15 (better than 15% compared with alternatives), West Fraser shows one of the most restricted growth dynamics in its industry. There is little momentum in this company. The Growth Rank is based on consolidating four value indicators, with three out of four indicators below average for West Fraser. Only Capital Growth has a good rank of 59, which means that currently professionals expect the company to grow its invested capital more than 18% of its competitors. The other three indicators are pointing South: Sales Growth has a rank of 16 which means that currently professionals expect the company to grow less than 84% of its competitors. Profit Growth with a rank of 18 and Stock Returns with a rank of 31 are also low (below 69% of alternative investments). ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 15, is a sell recommendation for growth and momentum investors. The good news from the invested capital side is surprising. A company with disappointing revenues, profits, and disappointed shareholders typically doesn't invest above average. Overall, the growth momentum for West Fraser is thus negative. As it is intriguing to see that company executives are optimistic about their investment policy, it is worthwhile looking into the details of the capital investment projects. They may indicate future growth and profits and thus if accompanied by a good value, a sign of good timing to invest in the stock. ...read more
Safety Strategy: West Fraser Debt Financing Safety very solid
| SAFETY METRICS | February 15, 2024 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 97 |
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| REFINANCING | ||||||||
| REFINANCING | 62 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 96 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 96 |
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ANALYSIS: With an Obermatt Safety Rank of 96 (better than 96% compared with alternatives) for 2024, 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 97, meaning the company has a below-average debt-to-equity ratio. It has less debt than 97% of its competitors. Refinancing is at a rank of 62, meaning that the portion of the debt about to be refinanced is below average. It has less debt in the refinancing stage than 62% 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 a consolidated Safety Rank of 96 (better than 96% 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 Above-Average Financial Performance
| COMBINED PERFORMANCE | February 15, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 40 |
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| GROWTH | ||||||||
| GROWTH | 15 |
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| SAFETY | ||||||||
| SAFETY | 96 |
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| COMBINED | ||||||||
| COMBINED | 54 |
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ANALYSIS: With an Obermatt Combined Rank of 54 (better than 54% compared with investment alternatives), West Fraser (Forest Products, Canada) shares have above-average financial characteristics compared with similar stocks. Shares of West Fraser are low in value (priced high) with a consolidated Value Rank of 40 (worse than 60% of alternatives) and show below-average growth (Growth Rank of 15) but are safely financed (Safety Rank of 96), which means low debt burdens. ...read more
RECOMMENDATION: A Combined Rank of 54, is a 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 40) and low growth (Obermatt Growth Rank of 15), 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 96) 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 lie all in the future, stock investing becomes guesswork, and this should only be a driver in a limited number of investments that account for a small fraction of a safe portfolio. ...read more
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