Weyerhaeuser Company (WY)

Total return at 5 years: 5.4%/year = 0.5% appreciation + 4.9% dividend. The target price ($19) is ex-dividend; the $5 in dividends collected over 5 years are added separately.

The methods disagree: one places the value today above the price ($19) and the other below.

Today — fairly valued: at $19 trades ~3.9% below its value discounted to today (~$20); the discount is positive but does not reach the margin of safety we require (≥38%).

At 5 years — En valor: the target price ($19) plus dividends yield between the 4% floor and the 10% average return — a reasonable return, though without the margin of a great investment.

The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$13.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($19) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The price discounts growth (19.1%/year) above our base case (10.0%/year) → it is priced for a demanding scenario and leaves little cushion against a slowdown.

That growth implies ~$0.7 bn of owner earnings in year 5 (vs ~$0.4 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). The flow is returned almost in full (dividend + buyback) or redeployed into the operation, so that EV stays roughly flat and multiples compress because the metric grows, not because of cash accumulation. The valuation is done on Utilidad neta antes de partidas especiales (P/E). In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Weyerhaeuser is valued as a sum of the parts on net income before special items, with a per-share multiple by piece: the metric is taken after interest and tax, so the model runs at the equity level (starting cash and debt at zero, the funding is already inside via the US$273 million of financial expense in fiscal 2025) and expenses stock-based compensation, which is 20.4% of the flow though only 0.6% of revenue. Year 0: revenue is the TTM ended 30-Jun-2026 (US$6,852 million); year-0 earnings are not the accounting figure of the last twelve months (US$472 million) but the annualization of earnings before special items for the second quarter of 2026 (US$91 million, or US$0.13 per share, from the release of 30-Jul-2026), because the accounting TTM carries US$157 million of asset sale results declared as special in the first half of 2026 (US$58 million from Virginia timberlands, US$71 million from Oregon timberlands and US$28 million of insurance recoveries). Tax rate 9%: it is the average of the real effective rates from XBRL for 2023 (10.5%) and 2024 (7.3%); the effective rate of the last twelve months is negative (−24.6%) on the pension charge and the losses of the taxable subsidiary, and a tax benefit of the period is not projected. Year-0 capex is that of fiscal 2025 taken from the statements (US$423 million of property and equipment plus US$51 million of reforestation), because the XBRL capex tag has been frozen since 2019; year 1 incorporates the guidance of US$400-450 million plus the US$300 million for the Monticello plant. With flat revenue, the Greenwald criterion assigns almost all capex to maintenance: the split is set at 80% and the declared exception is Monticello, which does buy new capacity. The path starts in recovery from the cycle trough rather than in deceleration, something the filing documents: lumber realizations rose 15% and OSB panel realizations 3% between the first and second quarters of 2026, Wood Products sales went from US$1,164 to US$1,360 million between those quarters, and full-year Natural Climate Solutions guidance was raised by US$25 million, to some US$450 million of adjusted operating income before depreciation. Cash stays flat: the company distributes more than it generates at the trough of the cycle (dividends US$605 million and buybacks US$55 million against nearly nil free cash flow), and the net share reduction runs at around 0.7% a year, below the threshold that would require modeling a share path.

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (the metric grows while EV stays roughly flat). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $19 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $19, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $19 in 5 years plus $5 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $20. Against the current market price ($19), the margin of safety is 3.9% (trades below the maximum → there is margin) and the total return at that price would be 5.4% annually.

• Estimated total return. +5% annually over five years on mid-cycle earnings, with +5% contributed by the dividend.
• Entry multiple. 38× today, compressing to 16× by year five as earnings normalize.
• Cycle normalization. Year five replicates 2023's profitability on a revenue base 6% larger, not 2022's.
• What the method does not credit. The private value of the land per acre stands as an optionality: the filing publishes specific transactions from $1,787 to $6,786 per acre overall—and from $1,787 to $3,111 narrowed to the three South transactions—but none supports a single representative price for that region.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✕ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (137%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Return on capital. 2.4% today and close to 7.8% at mid-cycle, both readings below the 10% bar.
• Cash backing of earnings. Operating cash flow fell to $547 million and free cash flow came in at just $22 million, practically nil; reported earnings lean on gains from asset sales.
• Durability of the asset. The land does not deplete and the inventory replenishes biologically: the asset survives any cycle.
• Reinvestment runway. Capex is almost entirely maintenance; the only relevant expansion is the Monticello plant.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

Weyerhaeuser's revenue breaks down into volume by price in each piece: Timberlands sells tons of logs at a regional price (the West, pricier and exposed to exports; the South, cheaper and more stable), Real Estate & Land Solutions sells acres at a per-acre price that depends on the mix of parcels, and the factory sells board feet of structural lumber and square feet of panels at a market realization it does not control. The collapse in the panel price —from US$298 to US$239 per thousand square feet— explains why the largest segment's result nearly disappeared in 2025.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Recent trajectory. Four consecutive periods of revenue decline, with the drop shrinking from −24.6% to −2.6%.
• Turn signal. Structural lumber realizations +15% and OSB panel realizations +3% between the first and second quarters of 2026.
• Current guidance. Real Estate & Land Solutions raised its full-year guidance by US$25 million, to roughly US$450 million.
• Long-term driver. Depends on housing starts and mortgage rates, two variables outside the company's control.

• Perpetual, non-replicable asset. More than 10 million owned acres, with standing inventory that grows at no capital outlay.
• Pricing power. The filing states that wood products have few distinguishing properties and that competition is largely defined by price.
• Predictability of results. The largest segment's result went from US$457 to US$55 million in a single year.
• Structural cost advantage. Integration between owned forests and plants, plus a tax structure with no corporate tax on qualifying income.
• Diversification of monetization. Three pieces of a different nature on the same land base: harvesting, sales and royalties, and manufacturing.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Leverage (net debt / EBITDA)Net cash $0 bn
• ✕Interest coverage (EBIT / interest)1.4x
• –Liquidity (current ratio)no data
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 137% of ROIC
• ✕Value creation (ROIC − 10% bar)-8pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 0.9x — no over-investment
• –Float / working capitalNeutral WC
• ✓Dilution (SBC % of revenue + shares)SBC 0.6% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Leverage. US$5,425 million of debt against US$9,456 million of equity and US$273 million of interest expense.
• Liquidity. US$527 million of cash and a 2025 refinancing that pushed maturities to 2028 and 2030.
• Distribution coverage. Dividends and buybacks exceeded free cash flow in 2025; the gap was covered with debt and asset sales.
• Asset backing. The debt is supported by a land base that, when needed, sells at prices far above its book value.

How cash comes in and how it is deployed. In green, the business's own cash (the owner-FCF it generates and reinvests); in gray, the float and credit — customer and funding money, which is not the shareholder's.

Fiscal 2025 allocation on a total of US$1,709 million: capex US$474 million (27.7%), timberland acquisitions US$469 million (27.4%: 117 thousand acres in North Carolina and Virginia for US$364 million and about 10 thousand acres in Washington for US$95 million, both in August 2025), dividends US$606 million (35.5%) and buybacks US$160 million (9.4%). Distributions exceeded free cash flow at the cycle floor, and the difference was funded with net debt issuance (US$487 million: US$1,199 issued less US$712 repaid) and with proceeds from asset sales (US$466 million: US$405 million from timberlands plus US$61 million from the Princeton sawmill).

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Track record. Chief executive since 2019, with thirteen and a half years at the company (since 2013) and a prior stint leading Timberlands.
• Capital allocation. Land rotation at verifiable prices and orderly refinancing, but distributions above free cash flow at the cycle floor.
• Alignment. No controlling shareholder; the aggregate holdings of directors and executives could not be isolated from the proxy and are declared as missing.
• Candor in communication. The release separates special items, publishes prices and volumes by region and forecasts the following quarter in detail.

• The market does not capitalize this company's reported earnings: it prices against the private value of land per acre, which the timberland segment's earnings do not explain. On that yardstick, today's price is consistent and there is no discount.
• The cycle floor confuses the reading in both directions: earnings over the last twelve months are lower than the dividend, which scares off the income buyer, while at the same time the price already discounts a recovery that is not yet in the financial statements.
• The trust structure and the variable distribution attract a holder who buys for the dividend; the drop in total payments from US$2.17 to US$0.84 per share between 2022 and 2025 —from the variable supplemental turning off, not a cut to the base— drove that buyer away without the asset's value changing.

No clear source of discount is identified. When the price is set by an asset whose market value the filing does not publish, the honest conclusion is that the method is measuring the going-concern business while the market is measuring something else; it is better to say so than to force an opportunity.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at -5%/year (-24% total): the margin of safety protects the downside. The bull (+14%/year, +92% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Housing cycle. The first risk stated in the filing: demand depends on housing starts, employment and mortgage rates.
• Commodity price. No pricing power; an industry supply glut depresses margin outside the company's control.
• Trade policy. General 10% tariff applied in 2025 and duties on Canadian softwood lumber with no long-term agreement since 2015.
• Physical risk to the inventory. Fires, pests, drought and floods on the primary asset, plus harvest restrictions for species protection.
• Tax qualification. Losing real estate investment trust status would mean full corporate tax and disqualification for four fiscal years.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  Fails the quality gate: ROIC 2% does not clear the 10% bar.

• Peter Lynch Growth at a reasonable price (GARP)

  A cyclical growing 10% at a PEG of 3.8 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 3% (EBIT/EV) + ROIC 2% → falls outside the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts 19% vs our 10%: priced for perfection, no favorable mispricing.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -12%/yr over 5y (material loss) → risk of permanent capital loss.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, stable; sources: efficient scale, cost advantage, intangibles → passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  The price demands 19% growth, far above our 10% — heroic assumptions.