Several years ago, the timber and wood industry was known for making hefty gains on the stock market. But as the world has turned its focus toward other sources of energy in recent days, so did the general market. The timber and wood market has seen apathy from investors during the last few weeks. West Fraser Timber Co. Ltd. (NYSE: WFG), one of the premier companies involved in the timber and wood business, also had to bear the brunt of this trend, as the stock has slid more than 5% during this year. With the chances of a decline in oil prices in near future not apparent over the horizon, analysts are warning that bears would dominate WFG trade during the upcoming few weeks.
What’s Cooking for WFG?
In recent days have seemed West Fraser striving to improve its financial model, with the company announcing that approval for the initiation of a substantial issuer bid. According to the offer, the company said that it would offer to purchase from shareholders for cancellation approximately $1.25 billion of the outstanding common shares. Another step in this regard was the reduction of capacity at its pulp mill in Hinton, Alberta. The company said that one out of two production lines at Hinton Pulp would shut. The move is aimed at staffing level transition, from 345 to 270 positions.
Some Facts and Figures
West Fraser (WFG) has a market capitalization of $11.56 billion, quite an outstanding figure given the fact that the general wood and timber industry has not got many companies with such a colossal market cap. The beta value of -0.24% is an indicator of the fact that the stock doesn’t experience many fluctuations, while the P/E ratio of 3.34% is the epitome of the good investment opportunity that WFG provides to the investors.
Risks for WFG
Even though the figures don’t indicate it, WFG is in grip of certain sorts of risks. With the timber industry facing a challenge in the wake of increasing global oil prices, investors would find it more convenient to invest in a stock that could provide them with hefty returns in a short period of time instead of the one having solid technical indicators but vulnerability on the performance front. Hence next few months could pose a mammoth challenge for WFG.
From the technical point of view, WFG is a stock that investors should place their bets upon, but due to the factors that are out of its control, the stock could fail to garner sufficient investor attention.