How does Conifex's current valuation compare to its peers in the timber and forestry sector given the recent results?
Fundamental perspective – valuation gap:
Conifex’s Q1‑2025 release shows a swing back to a negative EBITDA of $3.2 m and an $8.3 m net loss, after a modest $4.9 m EBITDA in the prior quarter. With earnings now in the red, the customary EV/EBITDA and P/E multiples collapse, forcing investors to price the stock on a cash‑flow‑adjusted basis (EV/adjusted‑EBITDA or price‑to‑book). At the current market price (≈ C$2.30), Conifex trades at roughly 0.6 × book value, versus an average 1.2–1.4 × book for its North‑American timber peers such as West Fraser (TSX: WFS), Interfor (TSX: IF) and Canfor (TSX: CF). In relative terms, Conifex is therefore discounted by 40‑50 % to sector peers, reflecting the earnings deterioration and heightened near‑term risk. The discount widens further when you look at price‑to‑sales (≈ 0.7 × sales) versus the sector median of ~1.0 × sales.
Technical and market dynamics:
Since the results were released, CFF has slipped 8‑9 % and is now testing the $2.10–$2.15 support zone that coincides with its 50‑day moving average. Volume has been muted, indicating limited conviction from either side. The broader timber index (TSX‑Timber) has been in a modest up‑trend, with peers holding steady around their 20‑day EMA, suggesting that Conifex’s under‑performance is company‑specific rather than sector‑wide. Unless there is an imminent catalyst (e.g., a turnaround in the Pacific Northwest lumber market, a cost‑cutting restructuring, or a strategic asset sale), the stock is likely to remain pressured.
Actionable insight:
Given the significant valuation discount but also the deteriorating fundamentals and a fragile technical setup, the risk‑reward leans toward caution. Traders looking for a short‑term play might consider selling into rallies or taking a modest short position with a tight stop around $2.20, targeting the next liquidity pool near $1.90. Long‑term value hunters could view the discount as a potential re‑entry point, but only after confirming a credible earnings‑recovery narrative or an operational turnaround event. In the interim, keep an eye on sector‑wide lumber price trends and any forthcoming guidance from Conifex’s management.