-$2.00
$5.00
bear -$2.00
base $0.00
bull $5.00
margin of safety $1.00
market price* $6.99
Business condition attached to the margin of safety
Two conditions: (1) the roughly $731 million of debt due in 2029 is refinanced or extended without raising annual interest cost above the current ~$98 million, and (2) a full year in which operating cash flow (excluding working-capital swings, after stock compensation) exceeds capital spending.
Rayonier Advanced Materials makes cellulose from wood pulp. In 2025 it had $1.47 billion of sales across five segments: Cellulose Specialties ($862M), Cellulose Commodities ($313M, largely fluff and viscose grades), Paperboard ($179M), High-Yield Pulp ($112M) and Biomaterials ($31M). It runs plants in Jesup, Georgia, Fernandina, Florida, Tartas, France and Temiscaming, Quebec. Cellulose production at Temiscaming has been indefinitely suspended. About 68% of sales go outside the United States, with China alone about 19%. What the numbers show. We measure what is left for shareholders after stock compensation and the capital spending needed just to stay in business, ignoring timing swings in receivables, inventory and payables. On that basis the company earned about $1.74, -$0.96, $1.86, $2.14, -$0.31, -$0.85, $0.09 and -$0.81 per share in 2018 through 2025. We look at 2021 onward, because lumber and newsprint mills were sold in August 2021 and the earlier years describe a different business. The middle of those five years is about -$0.31 per share, and the last three years average below zero. In 2025, operating cash flow was $24M, or about $67M before working-capital movements, against $116M of capital spending. Note that 2024's small positive result includes about $40M of one-time proceeds from selling lumber duty refund rights, which we removed as a working-capital item. The pattern is a strong specialty business carrying weak commodity businesses and heavy debt. Cellulose Specialties earned operating income of $160M in 2025 ($183M in 2024, $108M in 2023) and company-negotiated price increases in this segment are in the filings. Against that, Cellulose Commodities lost $55M (down from losses of $113M and $160M as Temiscaming was suspended), Paperboard and High-Yield Pulp swung to losses, corporate costs ran $70M, and interest expense reached $98M on $779M of debt. Of that debt, about $731M falls due in 2029. Sales fell 10% in 2025 on tariffs, weak fluff demand tied to China, labor strikes at Tartas and operating problems at several plants. In the first half of 2026, sales were flat at $695M, operating cash flow was $37M and capital spending fell to $47M from $75M a year earlier, with a net loss of $114M. The large 2025 net loss was mostly a non-cash $337M tax charge on Canadian tax assets, not a cash event. Growth reconciliation. Owner earnings per share fell from $0.09 in 2024 to -$0.81 in 2025. The base case assumes no recovery beyond what is already visible, so year one is not above that trailing trend. Base case, about $0 per share. The business roughly breaks even after the capital it must spend: before capital spending it produced about $61M to $114M a year in 2023 to 2025, roughly matching maintenance-type spending of $95M to $125M. Capital spending is being cut (first-half 2026 pace is about $95M a year versus $116M in 2025), which helps, but nothing else is contracted or already under way that would lift earnings. We do not credit a pricing recovery, fluff demand returning, tariff relief or new products such as prebiotics at Jesup, because none has yet shown up in results. With nothing named and evidenced producing positive earnings, the equity is valued at zero rather than at a hopeful placeholder. Bear case, about -$2.00 per share. The 2023 to 2025 pattern of about $54M a year of shortfall continues through the 2029 debt maturity, and lenders will not refinance $731M at current terms. In that outcome the company appears to owe more than the business is worth, by roughly $150M (about $2 a share) before considering the maturity itself. The named risks are the 2029 maturity, $98M of annual interest, and continued weakness in China-linked commodity demand and tariffs. A shareholder's loss is in practice limited to what they paid, so the practical meaning is that shares could be worth nothing. Bull case, about $5 per share. Cellulose Specialties holds its recent operating income of $160M to $183M, commodity losses stay at or below 2025 levels (already down from $160M in 2023), the Tartas strike and plant problems of 2025 do not recur, and capital spending stays near the first-half 2026 pace. That returns owner earnings to roughly $0.75 per share, close to what 2024 would have shown had its commodity losses already been at 2025 levels, and we credit it for ten years with no growth. This still requires a refinancing of the 2029 debt at similar cost. What could prove this wrong. Owner earnings turning solidly positive for two years would show the base case is too low. A refinancing on worse terms, further plant suspensions or write-offs, or a fall in Cellulose Specialties earnings would push toward the bear case. Depreciation of about $134M a year and asset impairments of $87M in 2023 and 2025 are added back in our measure, which is why the leverage and capital intensity are weighed in the bear case rather than in the earnings figure. We could not tie the 2018 to 2020 series exactly to the current business because those years include the sold lumber and newsprint operations.