What really caught my eye with this stock is its huge land holdings. Whenever I see a large amount of land holdings, I automatically think that the land probably isn't valued accurately on the balance sheet because GAAP requires companies to record property, plant, and equipment at historical cost. Because Potlatch was formed in 1909, there is a big chance the land is horribly undervalued.
Conveniently, Potlatch maintains an updated website for all of their land listings for sale. This gives a great way to figure out what this land is actually worth. I went to the website and averaged the price per acre of over 100 available land listings and created a nifty spreadsheet. This really piqued my interest, especially because Potlatch is currently trading for $34.11/share and the land alone is worth $66.06/share.
As a prudent investor, it's always a good idea to check out the income statement, statement of cash flows, and balance sheet, just to make sure everything checks out. As a side note, I do read the entire annual report, the latest quarterly report, any recent 8-K's, and any other relevant filings, and I recommend you do the same.
Now we need to quickly look at the balance sheet just to make sure liabilities don't totally cancel out our newly valued land. Just for a quick back-of-the-envelope calculation, we will be including all assets and liabilities, excluding timberlands obviously because we have our own, hopefully more accurate valuation. We find that Potlatch reports $3.34/share in current assets, $3.76/share in PP&E excluding timberland, $1.92/share in current liabilities, and $13.05/share in long term debt. Put together, we get a $7.87/share deficit in value, which we have to subtract from our land valuation. Doing that we find that Potlatch is worth $58.19/share, well above the $34.11/share it is trading for currently. This gives a sufficient margin of safety and looks like a buy to me.
Disclosure: Long PCH