What are we looking for?
There are a number of key variables driving Canadian forestry stocks over the next 12 to 36 months: single-family housing starts, 30-year mortgage rates, lumber prices, capacity closures, energy prices and softwood lumber duties. How long before this commodity-driven industry will turn around, and what do valuations suggest are the most undervalued stocks?
Background:
This sector appears to be following a classic commodity cycle where demand has yet to recover, but supply is adjusting. Weaker housing activity has reduced lumber demand and pressured prices, leading to declining financial results for producers. In response, companies have curtailed production, closed mills and removed capacity from the market. As housing activity recovers, a smaller production base will create the potential for higher lumber prices and improving profitability. Today, the industry appears to be in the supply-adjustment phase of this cycle
In May, 2026, U.S. housing starts fell to a seasonally adjusted annual rate of 1.177 million units, with single-family starts totaling only 882,000. At the same time, the average U.S. 30-year fixed mortgage rate remained elevated at 6.49 per cent, continuing to weigh on affordability. Despite these headwinds, the Joint Center for Housing Studies estimates the United States still faces a shortage of approximately 1.2 million entry-level homes, while existing inventory remains below prepandemic levels. Demand has been delayed by higher borrowing costs on elevated prices, especially for starter homes.
If single-family housing starts recover to 1.2 million units annually, demand would increase by 35 per cent from the May, 2026, pace. Combined with a smaller production base, that recovery would lead to a meaningful improvement in lumber prices, producer cash flows and ultimately the valuations of Canadian forest-products stock. Fastmarkets sees a turn starting in 2027. Historically, stock prices have doubled for these companies in 12 months as lumber prices bottomed out and turned higher.
Canadian producers face additional challenges though. U.S. softwood lumber duties are 35.16 per cent, although the U.S. Department of Commerce has signalled they could decline to 24.83 per cent following this summer’s annual review. B.C. producers must also contend with high fibre costs, reduced timber availability, high transportation costs and continuing mill closings. While these factors pressure profitability today, they also reduce North American production capacity.
The screen
We used StockCalc’s screener to select the top nine listed forest product stocks by market capitalization on the TSX. We then used StockCalc’s valuation tools to calculate fundamental (or intrinsic) valuation for each stock to see if it is undervalued or overvalued compared with its price. Overview of the techniques used:
- discounted cash flow (DCF value) is a valuation technique in which cash-flow projections are discounted back to the present to calculate value per share;
- a price comparables (price comps) technique values the company on the basis of ratios from selected comparable companies;
- an adjusted book value (ABV) is calculated by multiplying book value per share by its 10-year average price-to-book ratio.
- if we have analyst coverage, we may consider the consensus target price in our modelling.
More about StockCalc
StockCalc is a fundamental valuation platform with tools to calculate and report on value per share for thousands of public companies listed on major North American stock exchanges. StockCalc also contains numerous tools to understand what the stocks you are investing in are worth. Globe Unlimited subscribers can subscribe to StockCalc using the promo code Globe30, which offers a 30-day free trial and special pricing for the second month.
What we found
The big names on this list, West Fraser Timber Co. Ltd. (WFG-T), Canfor Corp. (CFP-T) and Interfor Corp. (IFP-T) are down 10 per cent over the past year. Canfor and Interfor are down more than 50 per cent from five years ago, with West Fraser flat over that period. Of note, the average price-to-book (PB) ratio for these stocks is 0.7, with seven of the nine stocks below 1.0. This industry has not seen an average PB ratio above one for four years now. The TSX 60 currently has a PB ratio of 2.6.
Let’s look at a few companies:
Softwood lumber company Canfor also owns Canfor Pulp Products. It is active throughout North America and Europe, with lumber mills in British Columbia, Alberta, the Southeastern United States, and Sweden. It has two reportable segments: lumber and pulp and paper. Canfor completed the acquisition of Canfor Pulp in March. Our models and analyst targets are above current price with our weighted valuation showing a significantly higher level than current price.
Acadian Timber Corp. (ADN-T) is a New Brunswick-based company engaged in forest management and the production of timber products, including softwood and hardwood sawlogs, pulpwood, and biomass byproducts sold to regional customers. The company operates through three segments: New Brunswick Timberlands, Maine Timberlands, and Environmental Solutions. The Environmental Solutions segment includes business activities related to the development and sale of voluntary carbon credits. Our models and analyst targets are in line with its current stock price.
You can see in the accompanying table the percentage difference between each stock’s recent closing price and its intrinsic value. The StockCalc Valuation column is a weighted calculation derived from the models and Analyst target data if used.
Brian Donovan, CBV, is the president of StockCalc, a Canadian fintech based in Miramichi, N.B.