July 27, 2023
Top 10 Stock Canfor Buy Recommendation
How to read the ranks
For every stock, we judge its performance against its peers and rank it on a scale of 1 to 100. The higher the rank, the better the stock performs than its peers. And, we do this for six investment strategies:
Value - shows how good of a value the stock is. Green is "inexpensive"; red is "expensive".
Growth - shows a company's growth potential. Green is "high growth" expected; red is "tough times ahead".
Safety - relates to the amount of debt a company has. Green is low debt level; red is high debt level.
Combined Financial - this isn't an average of the first three ranks but rather a consolidated view across several financial indicators. Green = good; red = tread carefully.
(NEW) Sentiment - quantifies professional analyst ratings and holdings as well as market pulse. Green = positive sentiment; red = skepticism (Only available to Premium Subscribers).
(NEW) 360° View - the ultimate rating with all financial and non-financial indicators.
Snapshot: Canfor – Top 10 Stock in Toronto Stock Exchange Index TSX Composite
Canfor is listed as a top 10 stock on July 27, 2023 in the market index TSX Composite because of its high performance in at least one of the Obermatt investment strategies. Two consolidated Obermatt Ranks are above-average. The company is safely financed and the professional investor sentiment is positive. Both are encouraging signals for a stock purchase decision, albeit at an above-average share price. Based on the Obermatt 360° View of 71 (high 71% performer), Obermatt assesses an overall buy recommendation for Canfor on July 27, 2023.
Snapshot: Obermatt Ranks
| Country | Canada |
| Industry | Forest Products |
| Index | Renewables Users, SDG 12, SDG 13, SDG 15, SDG 5, SDG 8, Timber Industry, TSX Composite |
| Size class | X-Large |
When Obermatt identifies the Top 10 stocks in a market, it’s based on a certain investment strategy. The best performing stocks usually aren’t the ones that everyone is talking about (those are often "over-priced" and have low Value ranks).
For each investment strategy, we provide you with more detailed analysis and our recommendation. You see the ranks of the top 10 stocks ranked by that particular investment strategy (360° View, Sentiment, Value, Growth, Safety and Combined Financial Performance).
360° View: Obermatt 360° View Canfor Buy
| 360 METRICS | July 27, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 28 |
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| GROWTH | ||||||||
| GROWTH | 47 |
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| SAFETY | ||||||||
| SAFETY | 100 |
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| SENTIMENT | ||||||||
| SENTIMENT | 57 |
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| 360° VIEW | ||||||||
| 360° VIEW | 71 |
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ANALYSIS: With an Obermatt 360° View of 71 (better than 71% compared with alternatives), overall professional sentiment and financial characteristics for the stock Canfor are above average. The 360° View is based on consolidating four consolidated indicators, with half below and half above average for Canfor. The consolidated Sentiment Rank has a good rank of 57, which means that professional investors are more optimistic about the stock than for 57% of alternative investment opportunities. It also rates well regarding its financing structure, with the consolidated Safety Rank at 100 or better than 100% of its peers when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. But the stock is expensive and expects low growth. The consolidated Value Rank is only 28, meaning that the share price of Canfor is on the high side, compared with indicators such as revenues, profits, and invested capital. The company exhibits below-average growth momentum when looking at financial metrics such as revenue, profit, invested capital growth,and stock returns, with its Growth Rank at 47. ...read more
RECOMMENDATION: With a consolidated 360° View of 71, Canfor is better positioned than 71% of all alternative stock investment opportunities based on the Obermatt Method. As only half of the consolidated Obermatt Ranks exhibit excellent performance, namely the positive professional market sentiment (Sentiment Rank of 57) and safe financing practices (Safety Rank of 100), the case for investing in this stock needs further thought. The Value and the Safety Ranks are below average. The Safety Rank is the least critical of the four consolidated ranks, because it only reflects financing practices. So the question is: How to assess below-average value against above-average sentiment? This may be a case where growth is in the future, not yet reflected in current performance. Companies that might fall into this category are those with intellectual property, such as technology and pharmaceutical companies. In early phases, they are expensive relative to their size and have a lot of capital on their books, as is the case here. Investors expect a better future and are willing to pay a higher price than is warranted by the current company size. These higher prices drive stock price value down in the short term. In this case, future growth may be the strongest driver of the investment case, reflected by institutional investors' opinions. With a weak Value Rank, the question is how much to sacrifice value at the cost of positive sentiment. Sometimes market sentiment is just hype, but sometimes it is right. You pay more than market-average for this stock, but it may be worth it, if the future of Canfoṛ is bright. Prudent investors may only want to invest a smaller portion of their wealth in such situations. Young investors can carry more risk but should still thrive for sufficient diversification. ...read more
Sentiment Strategy: Professional Market Sentiment for Canfor positive
ANALYSIS: With an Obermatt Sentiment Rank of 57 (better than 57% compared with alternatives), overall professional sentiment and engagement for the stock Canfor is above average. The Sentiment Rank is based on consolidating four sentiment indicators, with half of the metrics below and half above average for Canfor. Analyst Opinions are at a rank of 95 (better than 95% of alternative investments), which means that, currently, stock research analysts tend to recommend a stock investment in the company. Analyst Opinions Change is also positive and has a rank of 86 which means that currently, stock research experts are getting even more optimistic about investments in Canfor. But Market Pulse has a low rank of 13, which means that the current professional news and professional social networks are on the negative side when discussing this company (more negative news than for 87% of competitors). This is an essential sign of caution, as it could be the forebearer of bad news. Professional Investors are also somewhat absent with a rank of 22, which means that, currently, professional investors hold less stock in this company than in 78% of alternative investment opportunities. Pros tend to invest in other companies. This is expected if the company is of a smaller size (medium or smaller). ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 57 (more positive than 57% compared with investment alternatives), Canfor has a reputation among professional investors that is above-average compared with that of its competitors. While the general news feeds in the professional market are negative, the analyst recommendations are optimistic about the company, and even increase their ratings despite the negative news. This is an ambiguous situation with positive and negative signals from the professional side. Investors should be on the lookout for negative news but not worry too much about it as long as the overall news is still positive. ...read more
Value Strategy: Canfor Stock Price Value below-average critical
ANALYSIS: With an Obermatt Value Rank of 28 (worse than 72% compared with alternatives), Canfor shares are more expensive than the average comparable stock. The Value Rank is based on consolidating four value indicators, where half the indicators are below and half above average for Canfor. Price-to-Sales (P/S) is 71, which means that the stock price compared with what market professionals expect for future sales is lower than for 71% of comparable companies, indicating a good value concerning Canfor's revenue size. The same is valid for the Price-to-Book Capital ratio (also referred to as market-to-book ratio), which is more favorable than for 94% of alternatives (6% of peers have a higher ratio). But expected dividend yields with a Dividend Yield rank of 1 are lower than average (dividends are expected to be lower than 99% of other stocks) while the Price to Profit ratio (or Price to Earnings (P/E) ratio) is higher than average with a Price-to-Profit Rank of 3, making the stock more expensive compared with the company's expected profit levels. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 28, is a hold recommendation based on Canfor's stock price compared with the company's operational size and dividend yields. Low profits and low dividends as seen here for Canfor may indicate a restructuring phase. This could be transitory, making the company a good value when profits recover and dividends return to higher levels. If the stock price is compared with the size indicators for revenue and invested capital, it is on the lower side, making this stock a good value investment (apart from current profit and dividend expectations). ...read more
Growth Strategy: Canfor Growth Momentum low
ANALYSIS: With an Obermatt Growth Rank of 47 (better than 47% compared with alternatives), Canfor shows a below-average growth dynamic in its industry. There is limited momentum in this company. The Growth Rank is based on consolidating four value indicators, with half of the indicators below and half above average for Canfor. Sales Growth has a rank of 86 which means that currently, professionals expect the company to grow more than 86% of its competitors. Capital Growth is also above 12% of competitors with a rank of 68. But Profit Growth only has a rank of 12, which means that currently professionals expect the company to grow its profits less than 88% of its competitors. And Stock Returns have also been below average with a rank of only 15. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 47, is a hold recommendation for growth and momentum investors. Profits are sometimes low if the company invests in the future. The positive revenue and capital investment outlook confirms such an interpretation. Both revenues and capital are solid growth indicators, and lower profits in such a case would be encouraging. But the investors see it differently by punishing the share price. Sometimes, Mister Market is not very reliable, because it is not uncommon for it to be volatile. Investors should look out for signs of growth expenditure that could justify low profit growth, and they may also find reasons why recent stock price developments don't confirm the growth outlook of operations. While operating growth indicators are not perfect, they are more reliable indicators for future performance than stock prices that can repeatedly surprise investors. ...read more
Safety Strategy: Canfor Debt Financing Safety very solid
| SAFETY METRICS | July 27, 2023 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 90 |
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| REFINANCING | ||||||||
| REFINANCING | 91 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 88 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 100 |
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ANALYSIS: With an Obermatt Safety Rank of 100 (better than 100% compared with alternatives) for 2023, the company Canfor has safe financing practices, which means that their overall debt burden is low. This doesn't mean that the business of Canfor is safe, it only means that the company is on the safer side regarding possible bankruptcy, assuming that public reporting is correct. The Safety Rank is based on consolidating three financing indicators, where all three are above average for Canfor. Leverage is at 90, meaning the company has a below-average debt-to-equity ratio. It has less debt than 90% of its competitors. Refinancing is at a rank of 91, meaning that the portion of the debt about to be refinanced is below average. It has less debt in the refinancing stage than 91% of its competitors. Finally, Liquidity is also good at a rank of 88, which means that the company generates more profit to service its debt than 88% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 100 (better than 100% compared with alternatives), Canfor has a financing structure that is significantly safer than that of its competitors. These three positive financing indicators signal that the company is less likely to default on its debt obligations. However, it also means that its shareholder returns will be more modest if things go well. A low safety means fewer troubles in downtimes and less upside in good times. ...read more
Combined financial peformance: Canfor Above-Average Financial Performance
| COMBINED PERFORMANCE | July 27, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 28 |
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| GROWTH | ||||||||
| GROWTH | 47 |
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| SAFETY | ||||||||
| SAFETY | 88 |
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| COMBINED | ||||||||
| COMBINED | 69 |
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ANALYSIS: With an Obermatt Combined Rank of 69 (better than 69% compared with investment alternatives), Canfor (Forest Products, Canada) shares have above-average financial characteristics compared with similar stocks. Shares of Canfor are low in value (priced high) with a consolidated Value Rank of 28 (worse than 72% of alternatives) and show below-average growth (Growth Rank of 47) but are safely financed (Safety Rank of 100), which means low debt burdens. ...read more
RECOMMENDATION: A Combined Rank of 69, is a buy recommendation based on Canfor's financial characteristics. As the company Canfor's critical financial metrics exhibit below-average performance, such as low value (Obermatt Value Rank of 28) and low growth (Obermatt Growth Rank of 47), it is a somewhat questionable stock investment, where the risk of paying too much for the shares is significant, unless the company has an exceptionally bright future. In this case, good financing practices (Obermatt Safety Rank of 100) are a positive sign, because it may allow the company to weather challenging times until the hoped-for cash flows materialize. This may be true for high-tech or biotechnology companies with enough cash to sustain prolonged business development. If they own properties that only provide cash flows in the future, the stock may look excessively expensive and unattractive today. In such cases, the Obermatt Method has limited value, as it is based on facts we can observe today. If the facts lie all in the future, stock investing becomes guesswork, and this should only be a driver in a limited number of investments that account for a small fraction of a safe portfolio. ...read more
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