Relative to its recent past and relative to most other equities, Boise Cascade Co. (BCC, Financial) might be a candidate for the “cheap list” of value investors. Right now, the big lumber company in the materials sector trades at about 34% off of its 52-week high. This, while the major names in the Nasdaq 100 are just barely below their all-time highs scored just weeks ago.
If by “cheap” we mean the kind of stock described by Benjamin Graham in his classic work on the subject, "The Intelligent Investor," then the answer is yes. Boise Cascade’s price-earnings ratio at 6.3 is well below that of the S&P 500’s price-earnings ratio that is now sitting at 34. The Shiller price-earnings ratio of that major index sits at 38.
The lumber outfit has a book value of 1.96. By comparison, one of the major components of the S&P materials index, Celanese Corp. (CE, Financial), shows a book value of 4.52. Vulcan Materials Co. (VMC, Financial) trades with book at 3.85. Martin Marietta Materials Inc.’s (MLM, Financial) book value is 3.75. Generally, a materials company trading at less than 2 times book might be considered cheap compared to others in the same sector.
So, with a relatively low price-earnings ratio and a relatively low book value, Boise Cascade fits the initial model of the Graham value profile. What else? Well, the amount of long-term debt on the books is less than half shareholder equity, a favorable metric when examining for soundness. The current ratio is 2.3, which is also favorable. Price-to-free cash flow sits at 7.59, which looks like value as well compared to, say, Facebook’s (FB, Financial) ratio of 41.
Earnings per share show very good growth this year: up 115%. With a five-year earnings per share growth rate of 27.3%, Boise Cascade looks good. Analysts, however, show next year’s earnings per share coming in at -57% with a forward price-earnings ratio of 9.2. This suggests a close look at the macroeconomic picture, including lumber prices, housing costs and, of course, interest rates.
The stock pays a smallish dividend of 0.81%. From the standpoint of this type of analysis, any type of dividend is good even if it comes in at under the yield of the U.S. Treasury Note’s 1.1%. At least the company is paying some dividend to investors, it shows interest by management is pleasing them, a quality not always present in big tech, high price-earnings companies.
Boise Cascade trades on the New York Stock Exchange with an average daily volume of about 474,000 shares. This is less than your average materials stock, but should provide enough liquidity for most investors under ordinary circumstances. The insiders' transactions metric shows -3.94%, which presumably means they’re buying rather than selling. Please correct me if I’m wrong. The short float of 1.94% is low enough that professional squeezers of shorts are unlikely to be attracted.
The monthly price chart for Boise Cascade looks like this:
You can see how powerful the stock moved upward off of the March 2020 pandemic scare lows. After hitting an all-time high of $75, Boise Cascade has retreated to the current $49 level. Note that, despite the selling from earlier this year, it remains above the Ichimoku cloud (a mix of moving averages indicating basic trend).
To sum up: the lumber company is available for purchase at less than 2 times book value, which comes in lower than comparable materials companies. It’s trading with a price-earnings ratio much lower than that of the market taken as whole. With long-term debt significantly less than equity, recent very good earnings and paying a dividend, Boise Cascade is probably worth a deeper look for those investors seeking value.