We came across a bullish thesis on Rayonier Inc. (RYN) on Substack by Waterboy Investing. In this article, we will summarize the bulls’ thesis on RYN. Rayonier Inc. (RYN)'s share was trading at $25.06 as of April 16^th. RYN’s trailing and forward P/E were 10.49 and 44.05 respectively according to Yahoo Finance.

Aerial view of Timberland Real Estate Investment Trust's woodlands in the U.S. South and Pacific Northwest.

Rayonier (RYN), a timberland-focused REIT, presents a compelling investment opportunity with significant upside driven by a deep discount to its underlying asset value, a clear strategic direction, and multiple long-term catalysts. The company owns 1.75 million acres in the U.S. South and 308,000 acres in the Pacific Northwest. In a recent move aligned with its strategy to unlock value, Rayonier sold its 77% stake in a New Zealand joint venture for $710 million, implying a $922 million total valuation or $3,212.54 per acre. The sale marked a key step toward the company's broader $1 billion asset sale goal and brings total cumulative disposition proceeds to $1.45 billion. Following this transaction, Rayonier’s net debt was reduced to $132.7 million.

A back-of-the-envelope NAV calculation assigns $2,475 per acre to the U.S. South assets and $3,500 per acre to the Pacific Northwest holdings, resulting in an estimated $5.27 billion NAV versus a current market cap of $3.80 billion. This implies a NAV per share of $33.77 versus a share price of $24.38, reflecting a 27.8% discount—or 38.5% potential upside. Management appears confident in this valuation gap, having authorized a $300 million stock buyback program, equivalent to 7.9% of the market cap.

While Rayonier generated approximately $230 million in timber-related cash flow last year (including from New Zealand), it is evolving beyond a pure-play timber business. It’s transforming into a land resources company with growing exposure to higher-and-better use (HBU) opportunities such as solar development, carbon capture and storage (CCS), and real estate. According to CEO Mark McHugh, converting just 1% of the company’s land into these higher-value uses with a 10–15x value uplift could translate into a 10–15% increase in overall company value—rising exponentially with greater land conversion.

Rural HBU land values have surged, with average sale prices rising from $2,763 (2015–17) to $4,468 (2021–24), and premiums over timberland values increasing from 55% to 117%. Rayonier ended 2024 with 39,000 acres under solar option agreements, up from 27,000 a year prior. CCS leases expanded to 154,000 acres in 2024, up from 26,000 in 2023, including a 59,000-acre lease with ExxonMobil. Additionally, the Wildlight and Heartwood development projects surpassed $100 million each in cumulative revenue, with 26,700 entitled acres supporting 37,000 housing units and 44 million square feet of commercial development.

With inflation-resistant land, strong management, deleveraging efforts, and imminent capital returns, RYN offers an attractive margin of safety and upside potential for long-term investors.

Rayonier Inc. (RYN) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 26 hedge fund portfolios held RYN at the end of the fourth quarter which was 19 in the previous quarter. While we acknowledge the risk and potential of RYN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than RYN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.