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  5. WFG: Are lumber stocks bottoming out ? [West Fraser Timber Co. Ltd.]
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Q: Are lumber stocks bottoming out ? would you start buying ? what are you looking out for..interest rates ...
Asked by Gilles on August 31, 2023
5i Research Answer:

WFG’s operating results heavily depend on lumber prices, of course, but the housing sector seems to be recovering and if interest rates peak the sector could do well. WFG is now trading at only 0.9x times' Price/Book. Lumber prices have gone down substantially from the peak in COVID due to a supply and demand mismatch. The company's balance sheet is strong, with net cash of $460M. The company has been repurchasing shares aggressively, which we like. WFG is quite cheap, considering a possible recovery for lumber going forward. The company remains our favourite in the sector, and is well-managed. Interest rates and the N. American economy overall remain the key influences. We would be comfortable starting a position.