Kevin Stanley
Long/short equity, event-driven, research analyst, CFA

Domtar: Strong FCF Generation Provides Ample Room For Further Upside

Executive summary:

  • Material leverage to uncoated free sheet pricing strength still not reflected in 2014 consensus estimates.
  • Despite recent stock appreciation, shares remain cheap, likely even cheaper than when the stock was $80 (now over $100).
  • Strong FCF generation could result in accelerated share repurchases and expansion of higher margin Personal Care segment.
  • Valuation becomes quite compelling when factoring in FCF deployment, implying 30%-50% upside potential.


2014 is poised to be a banner year for Domtar (NYSE:UFS), a leading North America producer of uncoated free sheet paper ('ufs') , driven by considerable pricing strength for the commodity product. Following years of pricing weakness, momentum has clearly shifted, the direct result of the permanent closing of nearly one...

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