DCF Studio

    WY · NYQ · Real Estate

    Weyerhaeuser Company

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 1.71

    Market price

    USD 21.22

    Implied upside

    -91.9%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Wrong toolThis model values the shares at 8.1% of the market price. A gap that size is a modelling failure rather than a view - most often an unusable beta, a currency or units mismatch, or a cashflow base that does not represent the business. Read the figures below as diagnostics, not as a call.
    AdjustedCapital expenditure runs at 9.1% of revenue against depreciation of 6.4%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Current EV/EBITDA of 21.4x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 1.71-91.9%
    Exit multiple
    USD 11.10-47.7%
    Market price
    USD 21.22

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m346m693mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 6.1bnUSD 5.3bnUSD 4.7bnUSD 4.1bnUSD 3.6bn-12.1%
    EBITUSD 936.7mUSD 822.9mUSD 722.9mUSD 635.1mUSD 557.9m-12.1%
    NOPATUSD 838.7mUSD 736.8mUSD 647.3mUSD 568.7mUSD 499.6m-12.1%
    Add depreciation & amortisationUSD 388.9mUSD 341.7mUSD 300.2mUSD 263.7mUSD 231.7m-12.1%
    Less capital expenditureUSD -553.2mUSD -486.0mUSD -426.9mUSD -375.1mUSD -329.5m-12.1%
    Less increase in working capitalUSD 18.0mUSD 15.9mUSD 13.9mUSD 12.2mUSD 10.7m+12.1%
    Free cashflow to firmUSD 692.5mUSD 608.4mUSD 534.5mUSD 469.6mUSD 412.5m-12.1%
    Discount factor0.95950.88340.81340.74890.6895-
    Present valueUSD 664.5mUSD 537.5mUSD 434.8mUSD 351.7mUSD 284.4m-19.1%
    Present Value Of The ForecastUSD 2.3bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.926Reported 0.890, pulled toward 1.0 (Blume)
    Cost of equity10.09%Risk-free + beta x equity risk premium
    Cost of debt5.10%Interest expense / average total debt
    Market capitalisationUSD 15.3bn73.2% of capital
    Total debtUSD 5.6bn26.8% of capital, book value as a proxy
    Tax rate10.5%Effective, capped at statutory
    WACC8.61%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 1.71

    64% of EV

    Forecast FCFF, final year
    USD 412.5m
    Capex at depreciation, working capital in reinvestment
    USD 499.6m
    Less reinvestment at g/ROIC (29.0% of NOPAT)
    USD -145.0m
    Capitalised
    USD 354.6m
    ROIC (WACC floor)
    8.6%
    Terminal value, undiscounted
    USD 5.9bn
    Terminal value, discounted
    USD 4.1bn
    Enterprise value
    USD 6.4bn
    Less net debt
    USD 5.1bn
    Equity value
    USD 1.2bn

    Exit at 20.0x EBITDA

    Value per shareUSD 11.10

    83% of EV

    Terminal value, undiscounted
    USD 15.8bn
    Terminal value, discounted
    USD 10.9bn
    Enterprise value
    USD 13.2bn
    Less net debt
    USD 5.1bn
    Equity value
    USD 8.0bn

    Spread between methods: 147%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.61%4.124.164.204.234.27
    7.61%2.732.762.792.822.86
    8.61%1.661.691.711.741.77
    9.61%0.810.840.860.880.91
    10.61%0.130.150.170.190.21

    Outlined: this model. Green text: above today's price of 21.22. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year-12.1%15.1%+27.3pp
    EBIT margin15.4%47.2%+31.8pp
    Discount rate8.6%3.8%-4.8pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.