Should You Be Adding Weyerhaeuser (NYSE:WY) To Your Watchlist Today?

By
Simply Wall St
Published
September 27, 2021
NYSE:WY
Source: Shutterstock

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Weyerhaeuser (NYSE:WY). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for Weyerhaeuser

Weyerhaeuser's Earnings Per Share Are Growing.

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Impressively, Weyerhaeuser has grown EPS by 33% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Not all of Weyerhaeuser's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. Weyerhaeuser shareholders can take confidence from the fact that EBIT margins are up from 11% to 36%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.

In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.

earnings-and-revenue-history
NYSE:WY Earnings and Revenue History September 27th 2021

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Weyerhaeuser.

Are Weyerhaeuser Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

While we did see insider selling of Weyerhaeuser stock in the last year, one single insider spent plenty more buying. Specifically the Senior VP & CFO, Nancy Loewe, spent US$386k, paying about US$38.56 per share. That certainly pricks my ears up.

Along with the insider buying, another encouraging sign for Weyerhaeuser is that insiders, as a group, have a considerable shareholding. Given insiders own a small fortune of shares, currently valued at US$61m, they have plenty of motivation to push the business to succeed. That's certainly enough to make me think that management will be very focussed on long term growth.

Does Weyerhaeuser Deserve A Spot On Your Watchlist?

For growth investors like me, Weyerhaeuser's raw rate of earnings growth is a beacon in the night. Better still, insiders own a large chunk of the company and one has even been buying more shares. So I do think this is one stock worth watching. Even so, be aware that Weyerhaeuser is showing 3 warning signs in our investment analysis , and 1 of those is significant...

The good news is that Weyerhaeuser is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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