Today we're going to take a closer look at large-cap Industrials company Canadian National Railway Company, whose shares are currently trading at $115.04. 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 National Railway Company's Valuation Is in Line With Its Sector Averages:
Canadian National Railway Company, together with its subsidiaries, engages in rail and related transportation business. 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 National Railway Company has a trailing 12 month P/E ratio of 19.2 and a P/B ratio of 3.66.
Canadian National Railway Company's PEG ratio is 4.29, 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.
The Business Has Weak Operating Margins:
| 2019-12-31 | 2020-12-31 | 2021-12-31 | 2022-12-31 | |
|---|---|---|---|---|
| Revenue (MM) | $14,917 | $13,819 | $14,477 | $17,107 |
| Gross Margins | 40.8% | 41.8% | 41.9% | 43.2% |
| Operating Margins | 40.8% | 41.8% | -19.3% | 43.2% |
| Net Margins | 28.26% | 25.78% | 33.84% | 29.92% |
| Net Income (MM) | $4,216 | $3,562 | $4,899 | $5,118 |
| Net Interest Expense (MM) | -$538 | -$554 | -$610 | -$548 |
| Depreciation & Amort. (MM) | -$1,562 | -$1,589 | -$1,598 | -$1,729 |
| Earnings Per Share | $5.83 | $4.97 | $6.9 | $5.98 |
| EPS Growth | n/a | -14.75% | 38.83% | -13.33% |
| Diluted Shares (MM) | 723 | 713 | 710 | 662 |
| Free Cash Flow (MM) | $2,058 | $3,302 | $4,080 | $3,917 |
| Capital Expenditures (MM) | -$3,865 | -$2,863 | -$2,891 | -$2,750 |
| Net Current Assets (MM) | -$22,913 | -$22,051 | -$22,368 | -$26,061 |
| Current Ratio | 0.66 | 0.95 | 1.1 | 0.84 |
| Long Term Debt (MM) | $11,866 | $11,996 | $11,977 | $14,372 |
| Net Debt / EBITDA | 1.84 | 1.84 | 1.36 | 1.67 |
Canadian National Railway Company has growing revenues and decreasing reinvestment in the business and positive EPS growth. Additionally, the company's financial statements display consistent free cash flow and healthy leverage. However, the firm suffers from slimmer gross margins than its peers and weak operating margins with a stable trend.
