Weyerhaeuser CompanyWYNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $45.11 per share(market-calibrated)

+82.1%

Upside to Fair Value

Current

$24.77

Pure Model

$46.98

Fair Value

$45.11

Bull Case

$57.92

Bear Case

$36.94

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

0.50%

Calibrated Growth

1.80%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $46.98.

What's Driving This Ratingfor WY

↓

CapEx normalizing toward maintenance

Historical CapEx is 9.19% of revenue (heavy investment phase). Model fades this to 2.50% by Year 10, freeing up ~$644M in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 18.84% — below the sector mature average of 30.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $2.7B (27.66% margin).

→

Moderate revenue growth

Analyst consensus projects 3.03% revenue growth, fading to 2.50% by Year 10. Revenue reaches $9.6B (vs $6.9B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $38.68/share (18.9x terminal FCF) while exit multiple gives $55.27/share (29.0x terminal FCF). The 22x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 2.50% growth is more conservative. The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 200bps below the model's 2.50%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 75.81% indicates efficient cash generation. FCF reaches $2.5B by Year 10 (26.39% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.03

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)9.15%

Cost of Debt

Pre-tax Cost of Debt5.04%

Tax Rate21.00%

After-tax Cost of Debt3.98%

Equity Weight (E/V)76.23%

Debt Weight (D/V)23.77%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (76.23% × 9.15%) + (23.77% × 3.98%)

= 7.92%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$7.1B	$8.0B	$8.5B	$8.9B	$9.6B
EBIT	$1.3B	$1.5B	$1.9B	$2.3B	$2.7B
Tax	$281M	$318M	$408M	$477M	$559M
NOPAT	$1.1B	$1.2B	$1.5B	$1.8B	$2.1B
+ Depreciation	$509M	$575M	$608M	$638M	$687M
- Capex	$654M	$620M	$529M	$422M	$240M
- Δ NWC	$10M	$13M	$9M	$10M	$11M
Free Cash Flow	$904M	$1.1B	$1.6B	$2.0B	$2.5B
Discount Factor	0.927	0.796	0.683	0.586	0.467
Present Value	$838M	$906M	$1.1B	$1.2B	$1.2B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$2.5B

Terminal Growth Rate2.50%

WACC7.92%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$48.0B

PV of Terminal Value$22.4B

Exit Multiple Method

Year 10 EBITDA$3.3B

Exit Multiple (EV/EBITDA)22.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$73.6B

PV of Terminal Value$34.4B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$10.6B

PV of Terminal Value$22.4B

Enterprise Value$33.0B

(-) Net Debt$5.1B

Equity Value$27.9B

Shares Outstanding721M

Price per Share$38.68

Exit Multiple Method

PV of Projected FCFs$10.6B

PV of Terminal Value$34.4B

Enterprise Value$45.0B

(-) Net Debt$5.1B

Equity Value$39.9B

Shares Outstanding721M

Price per Share$55.27

Pure Model Fair Value

$46.98

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.50%	2.00%	2.50%	3.00%	3.50%
5.92%	$60.80	$63.82	$67.73	$72.97	$80.39
6.92%	$51.47	$53.28	$55.49	$58.27	$61.86
7.92%	$44.43	$45.60	$46.98	$48.64	$50.67
8.92%	$38.83	$39.62	$40.54	$41.61	$42.88
9.92%	$34.21	$34.78	$35.42	$36.15	$36.99

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$36.94

49.1% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.29

Base Case

$46.98

89.6% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 1.03

Bull Case

$57.92

133.8% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.88

Key Assumptions & Drivers• Real Estate Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth3.03%

Year 3 Revenue Growth3.76%

Year 5 Revenue Growth2.50%

Year 7 Revenue Growth2.50%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin18.84%

Terminal EBIT Margin30.00%

Tax Rate21.00%

Historical Capex / Rev9.19%

Terminal Capex / Rev2.50%

NWC / Revenue4.58%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 22x EV/EBITDA (Real Estate sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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