I’ve been considering buying Woodbois Limited (LSE: WBI) shares for several weeks, despite the Woodbois share price falling 4% today, to 3.75p per share.
But news of record revenues in the last quarter have boosted my positivity around the stock. Is the market missing a trick here? And should I buy the timber company’s shares for my portfolio?
Record sales
Between July and September, Woodbois’ sales rocketed 29% year on year to $5.8m, it said today. This represented a record quarter for the business, and helped it post record nine-month revenues of $17.1m. This was up 35% from the same 2021 period.
Record production
Woodbois also posted record production in the last quarter, it said. Sawmill production hit 6,032 cubic metres in the July-September period, up 78% from the 2021 quarterly average. Veneer output meanwhile leapt 45% on a comparable basis, to 1,418 cubic metres.
Margins increase
Higher production volumes and cost initiatives meant that Woodbois’ margins continue to rise sharply, too. Further progress in Q3 meant gross profit margins rose to 24% for the first nine months of 2022. This was up from 23% during the first half of 2021 and 20% for the whole of 2020.
The business said that it expects further margin improvement in the final quarter too. It said it is “focused on higher margin own-product sales” for the remainder of 2022.
The firm added it is being helped by the stronger US dollar. Revenues are reported in the North American currency while costs are incurred at local currencies.
A dip buying opportunity?
The Woodbois share price has tanked since it struck its highs for 2022 in May and a number of positive London Stock Exchange updates have failed to pull the stock out of its tailspin.
Investors remain reluctant to dip their toes after the frantic buying and then selling that followed a research report tipping a 1,000% rise in the company’s shares.
Worries over wood demand in the short-to-medium term are also sapping market appetite for the stock. Today, Woodbois chief executive Paul Dolan drew attention to the “current worldwide uncertainties” that might affect its business.
This is something that I, as a potential investor, need to take seriously. But as someone who invests for the long term, I’m seriously considering buying the penny stock today.
3 reasons I’d buy Woodbois shares
Firstly, I like the ongoing operational progress Woodbois is making. Steps to ramp up production and margins remain impressive, as today’s update shows.
Secondly, I think the business could be an effective way to capitalise on the growing green economy. Demand for timber in construction is rising rapidly as builders increasingly seek out eco-friendly materials. The business is also looking to become a player in the carbon credits industry.
And finally, I think Woodbois’ share price could soar over the long term as the growing global population drives construction rates. Analysts at Gresham House have predicted that timber consumption will soar to 5.8bn cubic metres by 2050, from 2.2bn in 2020.