In a world where we write emails instead of memos, read newspapers online, and reuse office paper as much as possible, it's little wonder that the market for paper isn't thriving like it used to. This is particularly true for uncoated free-sheet paper (UFS), the kind generally used in business settings. Demand for UFS has fallen more than 15% since 2000. So why then is Goldman Sachs rating Domtar Corporation (NYSE: UFS), a company that derives much of its business from UFS sales and manufacturing, a buy?

In a tough market, Domtar has taken an interesting approach to the fact that demand for its product is decreasing: It has cut back on its operations and increased its prices. The plan is to make Domtar the lowest cost producer of UFS in North America, in an attempt to stay competitive with companies like International Paper (NYSE: IP), who have the advantage of operating in traditionally lower cost countries in South America.

The company also gained a lot of strength from its 2006 merger with the fine paper segment of Weyerhaeuser (NYSE: WY).

The strategy appears to be working: after an announcement about strategic cutbacks in July, and higher selling prices throughout the quarter, Domtar showed a strong third quarter profit, with $36 million net income, a sharp increase over the $11 million net income from the previous period. The company's sell-less-for-more policy should continue to show good results, but Goldman and other analysts warn that fourth quarter savings will most likely be offset against a strong Canadian dollar.

In the end, even though paper sales will remain a tight market, Dotmar's commitment to lowering costs while also taking advantage of the best that the scale of its operation has to offer makes it worth a closer look.

Type of Stock: Domtar Corporation is the largest integrated producer of uncoated free-sheet paper in North America.

Price Target: Goldman is predicting $11 a share by the end of 2008, which means that there's some good money to be made by picking it up now at $8.

Hilary Kramer,author of the newly released Ahead of the Curve, is a financial editor and money coach for AOL and an authority on investing.