Monday, March 21, 2011

Canadian Pacific Railway 3

I bought this stock (TSX-CP) in October 2006. I have made a total return on this stock of 5.8%. Just over 2% of the total annual return would be due to dividends. This stock is on the dividend lists that I follow of Dividend Achievers and Dividend Aristocrats (see indices).

In looking at the Insider Trading Report, there is minimal insider buying and insider selling. All insiders, including directors have more stock options than shares. Dividends were raised in 2010, so this shows that the management has confidence in the ability of the company to earn a profit in the next while.

I get a 5 year low median Price/Earnings Ratio of 9.9 and a 5 year high median P/E Ratio of 15.8. My current P/E Ratio of 14.1 is closer to the high rather than the low P/E Ratio. I get a current Graham Price of $53.55. The current stock price of $63.03 is some 17.7% higher. The average high 10 year difference between the Graham Price and the stock price is 14%. So this shows a rather high current stock price.

I get a 10 year average Price/Book Value Ratio of 1.71. The current P/B Ratio is 2.21, which is some 30% higher. So this also points to a rather high stock price. The only measure to show a reasonable stock price is the yield. The current yield is 1.71% and the 5 year average is 1.67%. These yields are very close.

When I look at analysts’ recommendations, I find Strong Buy, Buy, Hold and Sell. There is only one Sell recommendation, but there are lots of Hold recommendations. The consensus recommendation would be a Buy. This is common when you get both Strong Buy and Hold recommendations on a stock. (See my site for information on analyst ratings.)

One analyst thought that for the financial year ending in December 2010, CP delivered a solid performance, with revenue increasing across all lines of business. Another analyst thinks that exports are increasing in Canada due to Asian appetite for our resources. He feels that both CPR and CNR will benefit from this. One analyst states that CPR will benefit from increased fertilizer sales because one of the things CPR ships is fertilizer. Another feels that CPR is reducing its costs and that therefore there will be more upside in stock. I do not know why there is one sell recommendation.

Here is one bloggers analysis of this stock which recommends a Hold at Stock Pick Bloggers. Also, here is a slightly older report recommending a Hold from Daily Markets.

This company is a transcontinental railway operating in Canada and the U.S. Its rail network serves the principal centers of Canada, from Montreal to Vancouver and the U.S. Northeast and Midwest regions. Alliances with other carriers extend its market reach throughout the U.S. and into Mexico. Canadian Pacific Solutions provides logistics and supply chain expertise. Its web site is here CPR. See my spreadsheet at cp.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

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