Canfor Corp (CFP.TO) Intrinsic Value Analysis

Executive Summary

As of September 18, 2025, Canfor Corp's estimated intrinsic value ranges from $21.84 to $25.99 per share, depending on the valuation methodology applied.

Valuation Method	Fair Value (USD)	Implied Upside/Downside
Discounted Cash Flow (10Y)	$21.84	+63.3%
Earnings Power Value	$25.99	+94.4%

Is Canfor Corp (CFP.TO) undervalued or overvalued?

With the current market price at $13.37, the stock appears to be significantly undervalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Canfor Corp's intrinsic value, including:

1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
2. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component	Low	High
Long-term bond rate	3.2%	3.7%
Equity market risk premium	5.1%	6.1%
Adjusted beta	0.48	0.78
Cost of equity	5.6%	8.9%
Cost of debt	6.7%	7.0%
Tax rate	22.8%	23.9%
Debt/Equity ratio	0.44	0.44
After-tax WACC	5.5%	7.8%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

• Forecast Period: 10-year DCF
• Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
• Discount Rate: 6.7% (range: 0.0% - 9.3%)

Key Projections:

• Revenue growth from $5,253 (FY12-2024) to $6,591 (FY12-2034)
• Net profit margin expansion from -14% to 2%
• Capital expenditures maintained at approximately 8% of revenue

DCF Model	Fair Value	Enterprise Value	% from Terminal Value
5-Year Growth	$(1,234)	$(2,009)M	71.8%
10-Year Growth	$22	$3,161M	106.9%
5-Year EBITDA	$11	$1,935M	129.3%
10-Year EBITDA	$27	$3,791M	105.8%

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component	Value
Normalized Earnings	$235M
Discount Rate (WACC)	7.8% - 5.5%
Enterprise Value	$3,004M - $4,288M
Net Debt	$612M
Equity Value	$2,392M - $3,676M
Outstanding Shares	117M
Fair Value	$20 - $31
Selected Fair Value	$25.99

Key Financial Metrics

Metric	Value
Market Capitalization	$1561M
Enterprise Value	$2173M
Trailing P/E	0.00
Forward P/E	0.00
Trailing EV/EBITDA	10.45
Current Dividend Yield	59.21%
Dividend Growth Rate (5Y)	0.00%
Debt-to-Equity Ratio	0.44

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method	Weight	Weighted Value
Discounted Cash Flow (10Y)	75%	$6.55
Earnings Power Value	25%	$2.60
Weighted Average	100%	$22.88

Investment Conclusion

Based on our comprehensive valuation analysis, Canfor Corp's intrinsic value is $22.88, which is approximately 71.1% above the current market price of $13.37.

Key investment considerations:

• Strong projected earnings growth (-14% to 2% margin)
• Consistent cash flow generation

Given these factors, we believe Canfor Corp is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.