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  5. WFG: Western forest Products (WEF) has really taken a pounding. [West Fraser Timber Co. Ltd.]
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Q: Western forest Products (WEF) has really taken a pounding. It reports its second quarter results on July 31. west fraser already reported and the shares have been rising. I know they are different forestry companies but was the lift in share value because there is optimism in the forestry industry or was it specific to West Fraser. I was thinking of averaging down on my WEF holding just because the share price is so low. The market cap is only about 130 million and I believe that WEF still has little debt so my way of thinking is, "this can't go much lower!!" Surely all their 6 sawmills, industrial land, three manufacturing plants and all their timber rights have to be worth more than 130 million!!! Or am I looking at this all wrong?
Asked by Paul on July 29, 2024
5i Research Answer:

First, we would note that ANY STOCK can go lower, even from a low base. This is one rule to follow. A further drop may not be justified, but it can still happen. This is especially true of small caps. A single fund throwing in the towel could still cause a significant decline. Our data shows WEF still has $105M in debt and/or lease obligations. Cash flow was negative $43M in the last 12 months and has been negative for three years. Losses are expected until at least 2026. The last quarter was at least better than estimates. WFG has no debt (net cash), is significantly larger, is very profitable, and reported stronger growth. It also raised its dividend. Its fundamentals are simply way better than WEF (it is much more expensive, though). We would not see WEF as a stock we would want to add to. 

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