Is Weyerhaeuser (WY) Pricing Reflect Long Term Cash Flow Outlook After TerraForge Venture

• If you are wondering whether Weyerhaeuser’s share price really reflects what the business is worth, you are not alone. This article is built to help you answer that question with numbers.
• Over the last week the stock returned a 2.2% decline, compared with a 4.0% gain over the past 30 days and a 2.6% decline year to date. The 1 year, 3 year and 5 year returns are a 13.5% decline, 18.7% decline and 11.8% decline respectively.
• Recent coverage around Weyerhaeuser has focused on ongoing interest in real estate and income focused stocks, as investors reassess how listed property names fit into their portfolios. This broader attention helps explain why some investors are revisiting the stock after a period of weaker share price performance.
• Our valuation checks give Weyerhaeuser a 2 out of 6 value score. Next we will look at how traditional methods such as P/E, P/B and cash flow based models line up with that figure, before finishing with a more rounded way to think about what the shares might be worth.

Weyerhaeuser scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Weyerhaeuser Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a business could be worth by projecting its future cash flows and then discounting those back to today’s dollars. For Weyerhaeuser, the model used here is a 2 Stage Free Cash Flow to Equity approach based on cash flow projections.

The latest twelve month Free Cash Flow is about $533.7 million. Analysts provide explicit forecasts out to 2027, with Simply Wall St extrapolating beyond that. By 2035, the FCF projection used in the model is $1.34b, all converted into today’s value using a discount rate to reflect risk and the time value of money.

Putting those cash flows together, the DCF model arrives at an estimated intrinsic value of $28.83 per share for Weyerhaeuser. Compared with the current share price, this implies the stock is 19.6% undervalued on this set of assumptions.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Weyerhaeuser is undervalued by 19.6%. Track this in your watchlist or portfolio, or discover 883 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Weyerhaeuser.

Approach 2: Weyerhaeuser Price vs Earnings

For a profitable company, the P/E ratio is a useful way to think about what you are paying for each dollar of earnings. Investors usually accept a higher P/E when they expect stronger growth or see lower risk, and a lower P/E when growth expectations are modest or risks feel higher.

Weyerhaeuser is currently trading at a P/E of 50.48x. That is above the Specialized REITs industry average of 16.69x and also above the broader peer average of 27.23x. Simply Wall St’s Fair Ratio framework estimates what a more tailored P/E might look like, based on factors such as Weyerhaeuser’s earnings growth profile, profit margins, market cap, risks and its industry.

This Fair Ratio for Weyerhaeuser is 41.62x. Compared with a simple peer or industry comparison, this is intended to be more specific to the company’s own fundamentals rather than relying purely on broad group averages. Set against the current P/E of 50.48x, the Fair Ratio suggests the shares are trading at a richer multiple than would be expected on these inputs.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Weyerhaeuser Narrative

Earlier we mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St’s Community page let you connect your view of Weyerhaeuser’s story to a set of revenue, earnings and margin forecasts, turn that into a Fair Value, compare it with today’s price to help inform your buy or sell decisions, and then see that Fair Value update automatically as new information such as news, earnings or developments like the TerraForge biocarbon venture and share buybacks comes in. This is why one investor might build a Narrative that aligns with a Fair Value near US$29.82, while another, with a different perspective, might lean toward the higher US$38 or lower US$29 analyst price targets instead.

Do you think there's more to the story for Weyerhaeuser? Head over to our Community to see what others are saying!

This article by Simply Wall St 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. Simply Wall St has no position in any stocks mentioned.

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