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List of Articles Stocks and Investing Stocks I Own Stock Advice Weight Loss and Fitness Sports Donate Back to Home	A Financial Analysis of Rayonier Introduction Rayonier (RYN) is a $3.30 billion company in the forestry & wood product industry. Market capitalization competitors in this industry include Louisiana-Pacific, Weyerhaeuser Company, and Deltic Timber Corporation. The wood industry is down 1.19% over the past year compared to the S&P 500 which is up 1.48% during the same period. Over the past month, the industry has been down 12.39%, while the S&P 500 has been down 6.34%. After a strong sell-off earlier this month, there is a strong potential for wood companies to grow. Evidence comes from a potentially recession-adverse industry and the willingness of consumer consumption. Rayonier's growth and valuation illustrate the potential for a strong earnings report next quarter. Business This section describes what Rayonier produces. According to Reuters, Rayonier “is an international forest products company primarily engaged in activities associated with timberland management, the sale and development of real estate, and the production and sale of specialty cellulose fibers.” The company owns over 2.7 million acres of timberland for its production which the company then manufactures in Georgia. The company splits its business segment into: timber, real estate, performance fibers, and wood products. Beginning with timber, Rayonier manages large acres of timberland and then sells the logs to third parties (usually lumber and plywood mills). Rayonier primarily produces softwood for further use, with its locations spread predominately in the southern United States. However, Rayonier also has involvement with lumber in New York and international sites, such as found in Australia and New Zealand. In addition to holding timberland, Rayonier also spends capital with real estate, investing in both development and rural properties. The next two business segments are performance fibers and wood products. Performance fibers are predominately produced in Florida and then exported to customers in Asia and Europe. Due to a very weak U.S. dollar, there is extraordinary potential for increased margin difference in export sales to these foreign nations. Since these fibers are used for products such as cigarette filters, rigid packaging, and LCD displays, there is a strong potential for increased demand in these developing nations. In addition, with the company’s wood product production in the United States, Rayonier has a strong business, which has the potential to boost share price futures higher. Growth Rayonier has a strong growth history. In the past fiscal year, the company reported, according to Reuters, a revenue figure near $1.23 billion. This number is 3.74% higher than what the company produced last fiscal year. Some investors may question the slow absolute growth, but relatively, Rayonier’s growth rate is much higher compared to the industry’s negative 10.43% rate. In addition, Rayonier’s fiscal year rate is also higher than the company’s five year average number of 1.82% and higher than competitor’s current fiscal year figures of 1.05% (Deltic), negative 12.35% (Weyerhaeuser), and negative 30.51% (Louisiana-Pacific). The same idea is true for Rayonier’s earnings. During the same time period, Rayonier saw EPS growth rise 5.87%. This number is higher than competitor Louisiana-Pacific’s number, which fell 154.67%, and this number is also higher than competitor Deltic Timber’s figure, which fell 13.90% this fiscal year. Therefore, there is strong evidence of Rayonier’s growth prospects in the future. However, in addition to percentage increases, Rayonier also does well margin-wise. According to Reuters, Rayonier saw gross, operating, and net profit margins last year of 25.57%, 21.49%, and 15.03%, respectively. These numbers were above the industry’s respective averages of 20.53%, 7.63%, and 4.52%. In addition, Rayonier’s current margins were also above the company’s five year average figures of 18.51%, 14.93%, and 11.25%, respectively. These five year averages were also above the industry’s respective five year averages as well. Therefore, Rayonier is keeping its costs low relative to the revenue the company receives. Compared to rivals, Rayonier’s margins are excellent. Weyerhaeuser has respective margins of 20.03%, 6.30%, and 2.94%. And Louisiana-Pacific has respective margins of 3.26%, -14.99%, and -6.86%. So, not only does Rayonier have absolutely strong margins, but relatively strong margins as well. The last metric of growth used to evaluate Rayonier comes from its ROE. This fiscal year, the company had an ROE of 19.99%. This figure was above the industry average of 7.77% and also above the company’s five year average of 16.50% (which was above the industry’s average of 10.01%). This figure illustrates that Rayonier is producing higher amounts of profit per each shareholder equity—illustrating a formidable use of its balance sheet accounts. And once again, Rayonier does better than its rivals. Weyerhaeuser’s ROE is only 6.04%. Louisiana-Pacific’s ROE is -6.53%, and Deltic Timber only reported a 6.42% amount. Rayonier’s ROA (9.89%) and ROI (10.92%) follow similar trends. Valuation With such a high ROE and growth figures, investors may figure that the company’s valuation may be overvalued. However, this assumption is not the case. According to Reuters, the industry P/E average is 28.37 and the respective price to sales average is 1.26. Rayonier sees a forward P/E ratio of 18.37 and a forward price to sales ratio of 2.70—mostly undervalued numbers compared to the industry. In addition, Rayonier’s numbers are also below industry competitors. Weyerhaeuser’s respective figures are 42.50 and 0.84, while Expedia supports a negative P/E and 0.75 price to sales combination. More specific to growth, Rayonier’s PEG ratio of 3.23 is relatively low compared to these industry rivals as well. Weyerhaeuser (6.63), Deltic (N/A), and Louisiana-Pacific (N/A) all have higher ratios compared to Rayonier. Therefore, using the aforementioned information, Rayonier is undervalued compared to the expected growth it will see in the future, making this stock an attractive buy for investors. Efficiency Rayonier is efficient. The company's receivable turnover of 13.12 is higher compared to the industry’s average of 12.12. Rayonier manages to collect cash from consumers every 28 days. Inventory turnover at 12.79 also follows a similar pattern compared to the industry’s 10.14 number. Moreover, asset turnover is also strong at 0.66. In terms of liquidation, Rayonier’s current ratio is 1.69—a good number related to debt and equity purchases. This statistic coincides with the company’s low debt to equity ratio of 0.63. Some investors may question low debt financing considering recently low growth, but high equity percentages have been beneficial to the company before and probably will be beneficial to the company in the future. Moreover, Rayonier’s dividend yield of 4.73% is much higher than the industry’s average of 3.70%. This yield is also higher than Deltic’s, Weyerhaeuser’s, and Louisiana-Pacific’s dividend yield. In addition, institutions own 67.10% of all Rayonier shares. Since the institutional investors have a larger gross amount of capital to lose compared to the retail investor, a high institutional percentage illustrates confidence in the stock's ability. Technical Analysis Rayonier has not performed too well in 2007. The company’s share price has increased 4.68% year-to-date. However, the low amount has some positive implications. There seems to be some support at the 41 dollar share price range dating back to mid-2007. The last time Rayonier reached this amount the company rebounded and appreciated 10%. There is a possibility a similar situation could occur in the future. More specific to the current month, Rayonier illustrates strong technical signals. The 50 day SMA and 50 day EMA have converged after the $46 mark, signaling a support level. Parabolic SAR did recently rise above the market price, and a potential outbreak will boast the SAR upwards, as that’s where it’s trending. The company is a little undervalued compared to the RSI index at 34.71, but it is better to be an advocate of fundamental valuations before technical valuations. Therefore, while now isn't the most ideal time to purchase shares of Rayonier according to technical analysis, purchasing shares will still produce strong long terms gains. Conclusion Rayonier is a great acquisition for any portfolio. The company's business model and fundamental analysis are both strong. It is very rare to find a company that has both strong valuation and growth, so it is wise to take advantage of these situations as they arise. -Dennis Biray January 11th, 2008 ©2008 BirayNetworks. All Rights Reserved

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A Financial Analysis of Rayonier

Introduction

Rayonier (RYN) is a $3.30 billion company in the forestry & wood product industry. Market capitalization competitors in this industry include Louisiana-Pacific, Weyerhaeuser Company, and Deltic Timber Corporation. The wood industry is down 1.19% over the past year compared to the S&P 500 which is up 1.48% during the same period. Over the past month, the industry has been down 12.39%, while the S&P 500 has been down 6.34%. After a strong sell-off earlier this month, there is a strong potential for wood companies to grow. Evidence comes from a potentially recession-adverse industry and the willingness of consumer consumption. Rayonier's growth and valuation illustrate the potential for a strong earnings report next quarter.

Business

This section describes what Rayonier produces. According to Reuters, Rayonier “is an international forest products company primarily engaged in activities associated with timberland management, the sale and development of real estate, and the production and sale of specialty cellulose fibers.” The company owns over 2.7 million acres of timberland for its production which the company then manufactures in Georgia. The company splits its business segment into: timber, real estate, performance fibers, and wood products.

Beginning with timber, Rayonier manages large acres of timberland and then sells the logs to third parties (usually lumber and plywood mills). Rayonier primarily produces softwood for further use, with its locations spread predominately in the southern United States. However, Rayonier also has involvement with lumber in New York and international sites, such as found in Australia and New Zealand. In addition to holding timberland, Rayonier also spends capital with real estate, investing in both development and rural properties.

The next two business segments are performance fibers and wood products. Performance fibers are predominately produced in Florida and then exported to customers in Asia and Europe. Due to a very weak U.S. dollar, there is extraordinary potential for increased margin difference in export sales to these foreign nations. Since these fibers are used for products such as cigarette filters, rigid packaging, and LCD displays, there is a strong potential for increased demand in these developing nations. In addition, with the company’s wood product production in the United States, Rayonier has a strong business, which has the potential to boost share price futures higher.

Growth

Rayonier has a strong growth history. In the past fiscal year, the company reported, according to Reuters, a revenue figure near $1.23 billion. This number is 3.74% higher than what the company produced last fiscal year. Some investors may question the slow absolute growth, but relatively, Rayonier’s growth rate is much higher compared to the industry’s negative 10.43% rate. In addition, Rayonier’s fiscal year rate is also higher than the company’s five year average number of 1.82% and higher than competitor’s current fiscal year figures of 1.05% (Deltic), negative 12.35% (Weyerhaeuser), and negative 30.51% (Louisiana-Pacific). The same idea is true for Rayonier’s earnings. During the same time period, Rayonier saw EPS growth rise 5.87%. This number is higher than competitor Louisiana-Pacific’s number, which fell 154.67%, and this number is also higher than competitor Deltic Timber’s figure, which fell 13.90% this fiscal year. Therefore, there is strong evidence of Rayonier’s growth prospects in the future.

However, in addition to percentage increases, Rayonier also does well margin-wise. According to Reuters, Rayonier saw gross, operating, and net profit margins last year of 25.57%, 21.49%, and 15.03%, respectively. These numbers were above the industry’s respective averages of 20.53%, 7.63%, and 4.52%. In addition, Rayonier’s current margins were also above the company’s five year average figures of 18.51%, 14.93%, and 11.25%, respectively. These five year averages were also above the industry’s respective five year averages as well. Therefore, Rayonier is keeping its costs low relative to the revenue the company receives. Compared to rivals, Rayonier’s margins are excellent. Weyerhaeuser has respective margins of 20.03%, 6.30%, and 2.94%. And Louisiana-Pacific has respective margins of 3.26%, -14.99%, and -6.86%. So, not only does Rayonier have absolutely strong margins, but relatively strong margins as well.

The last metric of growth used to evaluate Rayonier comes from its ROE. This fiscal year, the company had an ROE of 19.99%. This figure was above the industry average of 7.77% and also above the company’s five year average of 16.50% (which was above the industry’s average of 10.01%). This figure illustrates that Rayonier is producing higher amounts of profit per each shareholder equity—illustrating a formidable use of its balance sheet accounts. And once again, Rayonier does better than its rivals. Weyerhaeuser’s ROE is only 6.04%. Louisiana-Pacific’s ROE is -6.53%, and Deltic Timber only reported a 6.42% amount. Rayonier’s ROA (9.89%) and ROI (10.92%) follow similar trends.

Valuation

With such a high ROE and growth figures, investors may figure that the company’s valuation may be overvalued. However, this assumption is not the case. According to Reuters, the industry P/E average is 28.37 and the respective price to sales average is 1.26. Rayonier sees a forward P/E ratio of 18.37 and a forward price to sales ratio of 2.70—mostly undervalued numbers compared to the industry. In addition, Rayonier’s numbers are also below industry competitors. Weyerhaeuser’s respective figures are 42.50 and 0.84, while Expedia supports a negative P/E and 0.75 price to sales combination. More specific to growth, Rayonier’s PEG ratio of 3.23 is relatively low compared to these industry rivals as well. Weyerhaeuser (6.63), Deltic (N/A), and Louisiana-Pacific (N/A) all have higher ratios compared to Rayonier. Therefore, using the aforementioned information, Rayonier is undervalued compared to the expected growth it will see in the future, making this stock an attractive buy for investors.

Efficiency

Rayonier is efficient. The company's receivable turnover of 13.12 is higher compared to the industry’s average of 12.12. Rayonier manages to collect cash from consumers every 28 days. Inventory turnover at 12.79 also follows a similar pattern compared to the industry’s 10.14 number. Moreover, asset turnover is also strong at 0.66. In terms of liquidation, Rayonier’s current ratio is 1.69—a good number related to debt and equity purchases. This statistic coincides with the company’s low debt to equity ratio of 0.63. Some investors may question low debt financing considering recently low growth, but high equity percentages have been beneficial to the company before and probably will be beneficial to the company in the future.

Moreover, Rayonier’s dividend yield of 4.73% is much higher than the industry’s average of 3.70%. This yield is also higher than Deltic’s, Weyerhaeuser’s, and Louisiana-Pacific’s dividend yield. In addition, institutions own 67.10% of all Rayonier shares. Since the institutional investors have a larger gross amount of capital to lose compared to the retail investor, a high institutional percentage illustrates confidence in the stock's ability.

Technical Analysis

Rayonier has not performed too well in 2007. The company’s share price has increased 4.68% year-to-date. However, the low amount has some positive implications. There seems to be some support at the 41 dollar share price range dating back to mid-2007. The last time Rayonier reached this amount the company rebounded and appreciated 10%. There is a possibility a similar situation could occur in the future.

More specific to the current month, Rayonier illustrates strong technical signals. The 50 day SMA and 50 day EMA have converged after the $46 mark, signaling a support level. Parabolic SAR did recently rise above the market price, and a potential outbreak will boast the SAR upwards, as that’s where it’s trending. The company is a little undervalued compared to the RSI index at 34.71, but it is better to be an advocate of fundamental valuations before technical valuations. Therefore, while now isn't the most ideal time to purchase shares of Rayonier according to technical analysis, purchasing shares will still produce strong long terms gains.

Conclusion

Rayonier is a great acquisition for any portfolio. The company's business model and fundamental analysis are both strong. It is very rare to find a company that has both strong valuation and growth, so it is wise to take advantage of these situations as they arise.

-Dennis Biray
January 11th, 2008