• If you are wondering whether Weyerhaeuser is offering good value at its current share price, this article will walk you through what the market might be pricing in and what that could mean for you.
• The stock recently closed at US$27.10, with returns of 1.5% over the last 7 days, 5.2% over 30 days, 13.9% year to date, but a 5.4% decline over 1 year, a 10.0% decline over 3 years and a 3.0% decline over 5 years.
• These mixed returns set the backdrop for understanding whether the current price reflects caution or renewed interest from investors. This article was prepared to provide ongoing coverage of Weyerhaeuser, so the focus here is on how valuation tools interpret where the share price sits today.
• Right now, Weyerhaeuser scores 0 out of 6 on our valuation checks for being undervalued, which you can see in detail on our valuation scorecard. We will look at what different valuation approaches say about that number and then finish by considering a broader way to think about value beyond the models alone.

Weyerhaeuser scores just 0/6 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 company might be worth by projecting its future cash flows and then discounting those back to today using a required rate of return.

For Weyerhaeuser, the model used is a 2 Stage Free Cash Flow to Equity approach, starting from last twelve months free cash flow of about US$207.9 million. Analysts provide explicit forecasts out to 2027, with free cash flow for that year projected at US$717.7 million. Beyond that, Simply Wall St extrapolates further, and by 2035 the model is using a projected free cash flow of about US$972.0 million, with each year discounted back to present value.

Adding all those discounted cash flows together yields an estimated intrinsic value of US$21.96 per share. Compared with the recent share price of US$27.10, the DCF output suggests the stock is about 23.4% overvalued on this set of cash flow assumptions.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Weyerhaeuser may be overvalued by 23.4%. Discover 51 high quality undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Weyerhaeuser Price vs Earnings (P/E)

For a profitable company like Weyerhaeuser, the P/E ratio is a straightforward way to see how much you are paying for each dollar of earnings. A higher P/E can reflect stronger expected growth or lower perceived risk, while a lower P/E can point to more modest growth expectations or higher uncertainty.

Weyerhaeuser currently trades at a P/E of 60.27x. That compares with the Specialized REITs industry average P/E of about 16.07x and a peer group average of 26.50x, so the shares are priced at a higher earnings multiple than both the wider industry and peers. Simply Wall St also calculates a proprietary Fair Ratio for Weyerhaeuser of 45.24x, which estimates what a more appropriate P/E might be after considering factors such as earnings growth, profit margins, industry, market cap and company specific risks.

This Fair Ratio goes further than a simple peer or industry comparison because it adjusts for the fact that companies can have very different growth profiles and risk levels even within the same sector. When compared with the current P/E of 60.27x, the Fair Ratio of 45.24x indicates that Weyerhaeuser is trading above the level implied by these fundamentals.

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 let you attach a story about Weyerhaeuser to your numbers by linking your view of its future revenue, earnings and margins to a forecast, a fair value, and a clear comparison with today’s price. This is all available in an easy tool on the Community page that updates as new news or earnings arrive. It can also reflect very different perspectives, such as a more optimistic fair value around US$37.50 or a more cautious view near US$26.00, based on the same company but different assumptions.

For Weyerhaeuser, however, here is a simple overview with previews of two leading Weyerhaeuser Narratives:

Fair value in this narrative: US$30.64 per share

Implied discount to fair value vs the recent US$27.10 price: about 11.6% undervalued

Revenue growth assumption: 2.65% a year

• Analysts in this camp tie a higher fair value to gradual revenue growth, a mid single digit discount rate and an 8.6% profit margin assumption rather than a major change in the business overnight.
• The updated view reflects slightly higher projected revenue growth, a somewhat richer future P/E multiple and a modestly lower profit margin. Together these inputs result in a fair value estimate just above US$30 per share.
• The thesis leans on Weyerhaeuser’s scale in timberlands and new biocarbon initiatives, such as the TerraForge Biocarbon Solutions joint venture, as possible long term earnings contributors.

Fair value in this narrative: US$26.00 per share

Implied premium to fair value vs the recent US$27.10 price: about 4.2% overvalued

Revenue growth assumption: 0.85% a year

• The more cautious camp anchors on a US$26.00 fair value, using fairly flat revenue expectations, a 7.8% discount rate and a 7.5% profit margin as their base case.
• This view still allows for earnings to be higher in a few years, but pairs that with a future P/E of 42.1x and a relatively small upside to the analyst price target from the current share price.
• Supporters of this narrative focus on the idea that current timberlands, wood products and Natural Climate Solutions catalysts may already be well reflected in the share price.

Between these narratives you can decide which assumptions feel closer to how you see Weyerhaeuser’s revenue, margins and valuation developing over time, then weigh that against today’s US$27.10 price along with your own risk tolerance and time horizon.

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.