Surprisingly, CSX (CSX, Financial), a railroad, is down 8% over the past year, underperforming the S&P 500, which is up 3.7%. Why is it surprising, you ask? Well, transportation stocks usually lead the stock market in a recovery and CSX should be right in the middle of that. As the economy continues to pick up steam, companies should ship more and more goods. CSX is one of the one companies that stands to benefit. CSX also is in the right zone with the valuation the market is giving the company. It is being priced at a discount to competitors.
I would be a buyer of the stock here based on the thesis that it is undervalued to public comps and that we are in the early stages of an economy recovery. Notably, I disagree with some of the valuations here because of the fact that the last 5 years haven’t been favorable to CSX in regards to economic activity and the cash flow the company should generate in an economy recovery is not being used. CSX also yields 2.2% which should provide some income as an investor awaits price appreciation in the stock. Below is an in depth look at the valuations as well as the top holders of the stock.
CSX's trailing 5 year valuation metrics suggest that the stock is fairly valued as there is a mixed message about the three valuation metrics compared to their 5 year averages. CSX's current P/B ratio is 2.8 and it has averaged 2.3 over the past 5 years with a high of 3.3 and low of 1.3. CSX's current P/S ratio is 2 and it has averaged 1.9 over the past 5 years with a high of 2.6 and low of 1. CSX's current P/E ratio is 13.2 and it has averaged 15.4 over the past 5 years with a high of 18.1 and low of 11.6.
The consensus price target for the analysts who follow CSX is $28. That is upside of 26% from today's stock price of $22.05 and suggests that the stock is close to being fairly valued at these levels.
Here is a look at the forward valuation: CSX is currently trading at about $22 a share with analysts expecting EPS of $2.16 next year, an earnings increase of 14% year over year, for a forward P/E ratio of 10.2. Taking a look at the company's publicly traded comparisons will give us a better idea of the stock's relative valuation. Norfolk Southern (NSC, Financial) is currently trading at about $72 a share with analysts expecting EPS of $6.72 next year, an earnings increase of 12% year over year, for a forward P/E ratio of 10.6. Union Pacific (UNP, Financial) is currently trading at about $112 a share with analysts expecting EPS of $9.3 next year, an earnings increase of 15% year over year, for a forward P/E ratio of 12. Canadian National Railway (CNI) is currently trading at about $77 a share with analysts expecting EPS of $5.94 next year, an earnings increase of 12% year over year, for a forward P/E ratio of 13. The mean forward P/E of CSX's competitors is 11.9 which suggests that CSX is undervalued relative to its publicly traded competitors.
According to the DCF model provided by Dividend Kings, CSX is worth $22 a share versus its current stock price of $22.05 a share. This suggests that the stock is fairly valued.
The top two funds that own CSX are American Funds Growth Fund of America A, which owns 36.8 million shares or 3.51% of the shares outstanding, and American Funds Investment Co. of America A, which owns 30.7 million shares or 2.92% of the shares outstanding. The top two institutions that own CSX are Capital Research Global Investors, which owns 104.4 million shares or 9.94% of the shares outstanding, and Capital World Investors, which owns 51 million shares or 4.85% of the shares outstanding.
I would be a buyer of the stock here based on the thesis that it is undervalued to public comps and that we are in the early stages of an economy recovery. Notably, I disagree with some of the valuations here because of the fact that the last 5 years haven’t been favorable to CSX in regards to economic activity and the cash flow the company should generate in an economy recovery is not being used. CSX also yields 2.2% which should provide some income as an investor awaits price appreciation in the stock. Below is an in depth look at the valuations as well as the top holders of the stock.
CSX's trailing 5 year valuation metrics suggest that the stock is fairly valued as there is a mixed message about the three valuation metrics compared to their 5 year averages. CSX's current P/B ratio is 2.8 and it has averaged 2.3 over the past 5 years with a high of 3.3 and low of 1.3. CSX's current P/S ratio is 2 and it has averaged 1.9 over the past 5 years with a high of 2.6 and low of 1. CSX's current P/E ratio is 13.2 and it has averaged 15.4 over the past 5 years with a high of 18.1 and low of 11.6.
The consensus price target for the analysts who follow CSX is $28. That is upside of 26% from today's stock price of $22.05 and suggests that the stock is close to being fairly valued at these levels.
Here is a look at the forward valuation: CSX is currently trading at about $22 a share with analysts expecting EPS of $2.16 next year, an earnings increase of 14% year over year, for a forward P/E ratio of 10.2. Taking a look at the company's publicly traded comparisons will give us a better idea of the stock's relative valuation. Norfolk Southern (NSC, Financial) is currently trading at about $72 a share with analysts expecting EPS of $6.72 next year, an earnings increase of 12% year over year, for a forward P/E ratio of 10.6. Union Pacific (UNP, Financial) is currently trading at about $112 a share with analysts expecting EPS of $9.3 next year, an earnings increase of 15% year over year, for a forward P/E ratio of 12. Canadian National Railway (CNI) is currently trading at about $77 a share with analysts expecting EPS of $5.94 next year, an earnings increase of 12% year over year, for a forward P/E ratio of 13. The mean forward P/E of CSX's competitors is 11.9 which suggests that CSX is undervalued relative to its publicly traded competitors.
According to the DCF model provided by Dividend Kings, CSX is worth $22 a share versus its current stock price of $22.05 a share. This suggests that the stock is fairly valued.
The top two funds that own CSX are American Funds Growth Fund of America A, which owns 36.8 million shares or 3.51% of the shares outstanding, and American Funds Investment Co. of America A, which owns 30.7 million shares or 2.92% of the shares outstanding. The top two institutions that own CSX are Capital Research Global Investors, which owns 104.4 million shares or 9.94% of the shares outstanding, and Capital World Investors, which owns 51 million shares or 4.85% of the shares outstanding.
