TFSA Investors: 1 Stock That Could Double in Value

Acadian Timber Corp (TSX:ADN) owns approximately 1.1 million acres of freehold timberlands and manages approximately 1.3 million acres of land. The stock could double in value in 2021.

| More on:
Value for money

Image source: Getty Images

Acadian Timber Corp (TSX:ADN) owns and manages freehold timberlands in New Brunswick and Maine and provides management services relating to timberlands in New Brunswick. Acadian is a leading supplier of primary forest products, including softwood and hardwood sawlogs, pulpwood and biomass by-products, sold to approximately 85 regional customers throughout Maine, New Brunswick and Quebec.

The company has a price-to-earnings ratio of 11.91, a price-to-book ratio of 0.97, dividend yield of 7.10% and market capitalization of $272 million. Debt is very sparingly used at Acadian as evidenced by a debt to equity ratio of just 0.37. The company has excellent performance metrics with an operating margin of 22.07% and a return on equity of 8.27%.

Acadian’s timberlands have been used for timber production for more than a century and continue to be managed for sustainable timber production. Annual harvesting has been consistent with long-term forest management plans. The company engages in forest management, harvesting, marketing and sales and sells fibre to regional consumers including lumber mills, pulp and paper mills and other buyers of primary forest products.

Access to long-term, sustainable, high quality timber resources is important to Acadian’s customers. Acadian is very effective at harvesting timber in a cost effective and optimizing the product mix with effective marketing and merchandising. Additionally, Acadian provides forest management and harvesting services on a contract basis.

The operations of the Acadian Timberlands are conducted entirely in New Brunswick and Maine. The land base is operated by management teams located in Plaster Rock, New Brunswick and Millinocket, Maine. Total merchantable inventory amounts to 37.7 million cubic metre with an annual sustainable harvest volume of 1,042,000 cubic metre.

Several business strengths enables Acadian to maintain stable financial performance and remain a leading supplier of primary forest products. Timber resources is an attractive asset class since it can be managed on a sustainable basis to yield a predictable and stable volume of timber over an infinite period of time. Due to the natural biological growth of timber stands, value can be accumulated and stored in the form of unharvested timber over time.

Timberlands provide fibre for diverse solid and manufactured wood applications, the demand for which is naturally linked to population and economic growth. These characteristics of timberlands provide for stable, long-term cash flows and value appreciation over time. Acadian has robust markets for all products and the company works with customers to develop markets.

Acadian owns 1.1 million acres of freehold timberlands and manages 1.3 million acres of land. Large scale operations provide Acadian with the benefit of offering a reliable supply of roundwood to several large regional industrial consumers. Acadian has developed a reputation as a reliable, high quality supplier of large volumes of sawlogs and pulpwood and as a high quality supplier of smaller volumes of niche products.

Acadian’s large timberland scale allows it to spread costs over a large harvest volume and management area. Large scale operations also provide Acadian with a larger customer base and a broad range of regional market intelligence, which management believes increases the opportunity to get premium value for harvested roundwood.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Nikhil Kumar has no position in any of the stocks mentioned. The Motley Fool owns shares of ACADIAN TIMBER CORP.

More on Investing

tsx today
Energy Stocks

TSX Today: What to Watch for in Stocks on Thursday, December 7

An early morning recovery in commodity prices could lift the main TSX index at the open today.

Read more »

Aircraft wing plane

Prediction: Air Canada Stock Will Sit on the Runway for a While

Will Air Canada stock be able to continue to ride post-pandemic tailwinds, or is this stock pricing in an upcoming…

Read more »

Businessman holding AI cloud
Tech Stocks

Artificial Intelligence, Real Returns: Profiting From the AI Revolution

Tech companies like Shopify Inc (TSX:SHOP) are profiting from the AI revolution.

Read more »

Paper airplanes flying on blue sky with form of growing graph

Are Airline Stocks a Good Buy in December 2023?

Airline stocks are cyclical. So, interested investors should aim to buy low and sell high to target price appreciation.

Read more »

little girl in pilot costume playing and dreaming of flying over the sky
Stocks for Beginners

TFSA Investors: 3 Steps to Get Into Cross-Border Investing

Overseas trading can be scary. But if you follow these steps, you can certainly achieve far higher returns than just…

Read more »

Dividend Stocks

2 Top Telecommunication Stocks to Buy on the TSX Today

Two telco stocks, but not the dominant industry players, are buying opportunities on the TSX today.

Read more »

Business man on stock market financial trade indicator background.

Better Buy: Canadian Bank Stocks or Fintech Stocks?

Bank stocks like Bank of Nova Scotia (TSX:BNS) are often cheaper than fintech stocks.

Read more »

worry concern
Dividend Stocks

Is Now Actually the Right Time to Buy BCE Stock?

Looking for a great stock to buy at a serious discount? It’s the right time to buy BCE (TSX:BCE) stock…

Read more »