Today we're going to take a closer look at large-cap Industrials company Canadian Pacific Railway, whose shares are currently trading at $77.91. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!
Canadian Pacific Kansas City Limited, together with its subsidiaries, owns and operates a transcontinental freight railway in Canada and the United States. The company belongs to the Industrials sector, which has an average price to earnings (P/E) ratio of 20.49 and an average price to book (P/B) ratio of 3.78. In contrast, Canadian Pacific Railway has a trailing 12 month P/E ratio of 26.1 and a P/B ratio of 1.84.
P/B ratios are calculated by dividing the company's market value by its equity's book value. Equity refers to all of the company's assets minus its liabilities. Traditionally, a P/B ratio of around 1 shows that a company is fairly valued, but owing to consistently higher valuations in the modern era, investors generally compare against sector averages.
Canadian Pacific Railway's PEG ratio is 1.81, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
