CP.TO  Canadian Pacific Railway Ltd

Exchange

TSX

Sector

Diversified Industries

Industry

Market Cap.

28.49B

Vuru Grade

48.73/100

Current Price

$194.65
+0.29 (+0.15%)

Growth Price

$70.93
Overvalued by 63.56%

Company Metrics

  • P/E 18.31
  • P/S 4.56
  • P/B 6.15
  • EPS 10.63
  • Cash ROIC 4.20%
  • Cash Ratio 0.12
  • Dividend 2 / 1.02%
  • Avg. Vol. 384,431.00
  • Shares 146.37M
  • Market Cap. 28.49B

Company Description

Canadian Pacific Railway Limited, through its subsidiaries, provides rail and intermodal freight transportation services. It transports bulk commodities, including grain, coal, sulphur, and fertilizers; and merchandise freight that consists of finished vehicles and automotive parts. The company also transports forest products, such as wood pulp, paper, paperboard, newsprint, lumber, panel, and ori... more


Download 10 Years of Financial Statements:
Income Statement   Balance Sheet   Cash Flow

News

Is Canadian Pacific Railway Limited Worth Considering?
The Motley Fool Canada - Mar 22, 2017
The stock of Canadian Pacific Railway Limited (TSX:CP)(NYSE:CP) doesn't seem to be heading anywhere in a hurry. The company is now under the command of Keith Creel, who was ex-CEO Hunter Harrison's right-hand man for over 20 years.
Equities Analysts Issue Forecasts for Canadian Pacific Railway Limited's Q4 ... - The Cerbat Gem
The Q1 2017 EPS Estimates for Canadian Pacific Railway Limited Reduced by ... - Petro Global News 24
CP Rail overhauls firing policy to improve labour relations
The Globe and Mail - Mar 24, 2017
Canadian Pacific Railway Ltd. has implemented a new disciplinary program for its unionized employees in a bid to improve labour relations and overhaul a dismissal policy criticized as unduly harsh.
CP offers biggest potential rail return even after Harrison exit
Calgary Herald - Mar 13, 2017
During Hunter Harrison's four-year reign at Canadian Pacific Railway Ltd., shareholders about doubled their money. Even after his exit, Wall Street sees more room to run.
Canadian Pacific Railway Ltd chief executive steps down early to pursue ...
Financial Post - Jan 18, 2017
Canadian Pacific Railway Ltd. announced Wednesday that Harrison, 72, will step down immediately. He had originally planned to retire in July, but now intends to “pursue opportunities involving other Class 1 railroads,” CP said, using the industry term ...
Harrison Eyes Another Job After Retiring Early From Canadian Pacific - Bloomberg
Keith Creel to become CEO of Canadian Pacific; E. Hunter Harrison to retire - Canada NewsWire (press release)
Loop Capital dives into the railroads sector
Seeking Alpha - Mar 24, 2017
Loop Capital thinks railroads need to focus on more than just their operating ratio due to diminishing returns from incremental boosts.
Rail Stock Woes: Margin Management And The Law Of Diminishing Returns - Benzinga
Canadian Pacific Railway Results Miss Expectations
Wall Street Journal - Oct 19, 2016
Canadian Pacific Railway Ltd. reported another steep decline in revenue and lower-than-expected earnings on Wednesday as a delayed grain harvest and a slump in commodity prices hampered shipping volumes.
Canadian Pacific Railway Limited Falls Short of Expectations - The Motley Fool Canada
Delayed grain harvest weighs on Canadian Pacific Rail's earnings, but a bumper ... - Financial Post
Canadian Pacific Railway Ltd is a win for Bill Ackman, no matter how you keep ...
Financial Post - Aug 4, 2016
When activist investor Bill Ackman first approached Canadian Pacific Railway Ltd.'s management about making major changes to the underperforming railway, including hiring a chief executive who had just retired from its closest rival, they were ...
Billionaire Bill Ackman Dumps Canadian Pacific Railway Limited: Should You Too? - The Motley Fool Canada
Ackman's Pershing Square Sells Position in Canadian Pacific - Bloomberg
Canadian Pacific Railway Limited (CP) Stock Rating Reaffirmed by Loop Capital
Chaffey Breeze - 5 hours ago
Canadian Pacific Railway Limited (NYSE:CP) (TSE:CP)'s stock had its “buy” rating reaffirmed by research analysts at Loop Capital in a report issued on Saturday.
Canadian Pacific Railway Limited (CP) Earns Buy Rating from Loop Capital - Sports Perspectives
Cormark Weighs in on Canadian Pacific Railway Limited's Q1 2017 Earnings (CP) - BNB Daily (blog)
Canadian Pacific Railway Limited Has Some Troubles to Deal With
The Motley Fool Canada - Jan 11, 2017
Canadian Pacific Railway Limited (TSX:CP)(NYSE:CP) has some upside, but the company has some recent negativity that should keep investors at an arm's length for the time being.
Canadian Pacific Railway Limited (CP) Stock Rating Upgraded by CLSA - Sports Perspectives
Hunter Harrison made $18.8-million in final year at CP Rail
The Globe and Mail - Mar 16, 2017
Hunter Harrison, Canadian Pacific Railway Ltd.'s departed chief executive officer, was paid a total of $18.8-million in 2016, according to company documents filed with regulators.
Growth Rate Assumed by Market

We did a reverse valuation to calculate the growth rate the market is assuming for CP.TO to be considered fairly valued at its current market price. It's useful to compare this to the growth rate we're assuming for the Growth Price.

Future Free Cash Flow Growth Rate

This is the annual growth rate we've applied to calculate CP.TO's Free Cash Flow for the next 10 years. To calculate it, we looked at several time periods of the last 10 years. Feel free to adjust it, but we limit the initial growth rate to 20% and slow it down over the years. Otherwise, long-term sustainability issues come into play.

Discount Rate

The discount rate is the annual rate of return an investor requires to take the risk of investing in a single stock. To account for that risk, this should be above 8-10%, as this is the avg. annual rate of return for the S&P500 over the past 100 years.

$194.65 Current Price

$70.93 Growth Price (DCF)

Overvalued by 63.56%


Growth Rate Assumed by Market: 34.27%


Future Free Cash Flow Growth Rate: 0.0%


Discount Rate: 15.0%


Show Free Cash Flow numbers

$107.42 Book Price

Overvalued by 44.81%


Poor Cash Return on Invested Capital over the past 5 years

CP.TO has been unable to consistently generate sufficient returns from its investments in buildings, projects and equipment. This could be due to poor management, lack of an economic moat or the capital intensive nature of the business.

CP.TO has only created $4.20 of cash for every $100 invested.
Figures in CAD. Fiscal year ends in December
20122013201420152016
Free Cash Flow 180.00M 714.00M 674.00M 937.00M 907.00M
divided by
Invested Capital 13.16B 15.21B 15.00B 17.54B 17.71B
Cash ROIC 1.37% 4.70% 4.49% 5.34% 5.12%

Excellent Return on Equity over the past 5 years

Over the past 5 years, CP.TO has generated strong profits with money shareholders have invested. This is considered one of the best indicators of quality management. Beware of extremely high Return on Equity (> 50%) as this is often unsustainable.

CP.TO has generated $22.18 of Earnings for every $100 of Shareholders' Equity.
Figures in CAD. Fiscal year ends in December
20122013201420152016
Net Income 484.00M 875.00M 1.48B 1.35B 1.60B
divided by
Stockholders' Equity 5.10B 7.10B 5.61B 4.80B 4.63B
Return on Equity 9.50% 12.33% 26.31% 28.19% 34.57%

Good Business Performance over the past 10 years

It's likely CP.TO has been unable to maintain profitability in tough economic times, making it a somewhat cyclical business. The other possibility is CP.TO has expended significant capital on items such as property, plant and equipment in specific years. Look for correlations.

CP.TO has created positive free cash flow for 7 or 8 of the past 10 years.
Figures in CAD. Fiscal year ends in December
2007200820092010201120122013201420152016
Free Cash Flow 421.40M 186.80M -170.90M -224.00M -592.00M 180.00M 714.00M 674.00M 937.00M 907.00M

Weak Balance Sheet

CP.TO's financial position is not ideal. The key is to check whether CP.TO is using debt to fuel its growth and the sustainability of that tendency. Highly capital intensive businesses (see Economic Moat) follow this route, which can deeply impact the future prospects of the business.
Figures in CAD. Fiscal year ends in December
2007200820092010201120122013201420152016
Cash 378.10M 117.60M 679.10M 360.60M 47.00M 333.00M 476.00M 226.00M 650.00M 164.00M
Current Assets 1.17B 1.12B 1.43B 1.20B 856.00M 1.33B 2.03B 1.28B 1.54B 1.01B
Total Assets 13.37B 15.47B 15.53B 13.68B 14.11B 14.73B 17.06B 16.64B 19.64B 19.22B
Current Liabilities 1.34B 1.31B 1.38B 1.29B 1.21B 1.23B 1.38B 1.41B 1.45B 1.35B
Total Liabilities 7.91B 9.48B 8.83B 8.85B 9.46B 9.63B 9.96B 11.03B 14.84B 14.60B
Stockholder' Equity 5.46B 5.99B 6.71B 4.82B 4.65B 5.10B 7.10B 5.61B 4.80B 4.63B
Current Ratio 0.87 0.86 1.03 0.93 0.71 1.08 1.47 0.91 1.06 0.75
TL-to-TA 0.59 0.61 0.57 0.65 0.67 0.65 0.58 0.66 0.76 0.76

Low or No Reinvestment of Profits over the past 10 years

CP.TO has either been retaining a small amount of their earnings or has done so inconsistently. A lack of consistency could be due to CP.TO operating at a loss or them having such a strong economic moat they feel comfortable spending profits on growth. Be wary of future prospects and if applicable, inspect the moat's sustainability.
Figures in CAD. Fiscal year ends in December
2007200820092010201120122013201420152016
Retained Earnings 4.19B 4.65B 4.88B 5.07B 5.45B 5.70B 6.33B 5.61B 4.17B 4.37B
Retained Earnings Growth - 11.15% 4.78% 4.03% 7.33% 4.63% 11.04% -11.35% -25.61% 4.77%

Potential Competitive Advantage over the past 10 years

CP.TO potentially has a competitive advantage. This could be strong branding, the ability to keep costs low, or some other characteristic that is hard to replicate. Look at its future prospects to determine sustainability and whether the economic moat will strengthen.

$16.18 of every $100 of Revenue have been pure profit, on average over the past 10 years.
Figures in CAD. Fiscal year ends in December
2007200820092010201120122013201420152016
Net Income 946.20M 619.00M 612.40M 650.70M 570.00M 484.00M 875.00M 1.48B 1.35B 1.60B
divided by
Revenue 4.71B 4.93B 4.30B 4.98B 5.18B 5.70B 6.13B 6.62B 6.71B 6.23B
Net Profit Margin 20.10% 12.55% 14.23% 13.06% 11.01% 8.50% 14.27% 22.30% 20.14% 25.66%

Strong Pricing Power over the past 10 years

CP.TO has maintained substantial gross margins, suggesting that they have been able to set prices without consideration of the cost of goods sold. This potentially leaves flexibility in inflationary environments to raise prices on consumers and maintain profitability.

$69.24 of every $100 worth of sales have been Gross Profit, on average over the past 10 years.
Figures in CAD. Fiscal year ends in December
2007200820092010201120122013201420152016
Gross Profit 2.48B 3.04B 2.85B 3.24B 5.18B 3.52B 4.00B 4.39B 4.59B 5.31B
divided by
Revenue 4.71B 4.93B 4.30B 4.98B 5.18B 5.70B 6.13B 6.62B 6.71B 6.23B
Gross Margin 52.58% 61.57% 66.21% 65.09% 100.00% 61.77% 65.29% 66.37% 68.33% 85.24%

High Capital Intensity over the past 10 years

CP.TO spends large amounts of capital buying new equipment or investing in new facilities to stay competitive. Over the long term, those costs may have to be fuelled by debt. Look at the growth of Shareholders' Equity to see if this strategy is having a positive or negative impact.

132.49% of Profits are being spent on Capital Expenditures, like Property, Plant, & Equipment, required to run the business.
Figures in CAD. Fiscal year ends in December
2007200820092010201120122013201420152016
Capital Expenditure 893.20M 892.30M 722.40M 726.10M 1.10B 1.15B 1.24B 1.45B 1.52B 1.18B
divided by
Net Income 946.20M 619.00M 612.40M 650.70M 570.00M 484.00M 875.00M 1.48B 1.35B 1.60B
Capital Expenditure Ratio 94.40% 144.15% 117.96% 111.59% 193.68% 237.19% 141.26% 98.17% 112.57% 73.92%

Very Strong Dividend History over the past 10 years

CP.TO has consistently distributed a dividend for at least the past 10 years. Such a long dividend history suggests CP.TO is very established in its market and that its dividend distribution is likely to continue for a significant period of time.
Figures in CAD. Fiscal year ends in December
2007200820092010201120122013201420152016
Dividend Paid 133.10M 148.70M 162.90M 174.50M 193.00M 223.00M 244.00M 244.00M 226.00M 255.00M
divided by
Shares Outstanding 155.63M 155.60M 166.80M 169.20M 170.60M 173.20M 176.50M 174.40M 161.00M 150.50M
Dividend Paid Per Share 0.85 0.95 0.97 1.02 1.12 1.28 1.37 1.39 1.39 1.68
Price at Year End 60.23 38.18 54.85 63.43 69.01 100.50 160.00 224.30 176.99 191.56
Dividend Yield 1.41% 2.48% 1.77% 1.61% 1.63% 1.27% 0.86% 0.62% 0.79% 0.88%

History of Stock Buybacks over the past 10 years

CP.TO has some history of delivering increased value for shareholders in the form of stock buybacks. These have helped improve financial metrics and increase each shareholders' relative ownership stake in the company, due to fewer shares outstanding and holding the same number of shares.
Figures in CAD. Fiscal year ends in December
2007200820092010201120122013201420152016
Shares Outstanding 155.63M 155.60M 166.80M 169.20M 170.60M 173.20M 176.50M 174.40M 161.00M 150.50M
Stock Bought Back - 0.02% -6.71% -1.42% -0.82% -1.50% -1.87% 1.20% 8.32% 6.98%
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