What Does West Fraser Timber Co Ltd.'s (TSE:WFT) Share Price Indicate?

West Fraser Timber Co Ltd. (TSX:WFT), a forestry company based in Canada, received a lot of attention from a substantial price movement on the TSX in the over the last few months, increasing to CA$93.23 at one point, and dropping to the lows of CA$77.57. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether West Fraser Timber's current trading price of CA$83.79 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at West Fraser Timber’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View our latest analysis for West Fraser Timber

What is West Fraser Timber worth?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 7.82% below my intrinsic value, which means if you buy West Fraser Timber today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth CA$90.9, then there isn’t much room for the share price grow beyond what it’s currently trading. Furthermore, West Fraser Timber’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

Can we expect growth from West Fraser Timber?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 28.69% over the next couple of years, the future seems bright for West Fraser Timber. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? WFT’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on WFT, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on West Fraser Timber. You can find everything you need to know about West Fraser Timber in the latest infographic research report. If you are no longer interested in West Fraser Timber, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.