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While Western Forest Products Inc. (TSE:WEF) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the TSX, rising to highs of CA$1.09 and falling to the lows of CA$0.82. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Western Forest Products' current trading price of CA$0.82 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Western Forest Products’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for Western Forest Products
What's The Opportunity In Western Forest Products?
According to my valuation model, the stock is currently overvalued by about 30%, trading at CA$0.82 compared to my intrinsic value of CA$0.63. This means that the buying opportunity has probably disappeared for now. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Western Forest Products’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of Western Forest Products look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of Western Forest Products, it is expected to deliver a negative revenue growth of -12% over the next couple of years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What This Means For You
Are you a shareholder? If you believe WEF is currently trading above its value, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the risk from a negative growth outlook, this could be the right time to reduce your total portfolio risk. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on WEF for some time, now may not be the best time to enter into the stock. Its price has risen beyond its true value, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?