Friday, October 11, 2013

Canadian Pacific Railway 2

On my other blog I am today writing about the stock market and holding cash ...continue...

I do not currently own this stock of Canadian Pacific Railway (TSX-CP, NYSE-CP). It is a stock I held from 1987 to 1999 so I am following it. I also held it from 2006 to 2011. I decided in 2011 to have only one railway stock and chose CN as my railway stock. CP is a dividend growth stock.

When I look at insider trading, I find $160M of insider selling and $150.6M of net insider selling with $9.3M of insider buying. There is serious money outstanding in options and option like vehicles like Deferred Share Units (DSU), Restricted Share Units (RSU), Performance Share Units (PSUs) and Stock Appreciation Right (SARs).

The CEO has shares worth $24.1M and has options worth $93.3M. The CFO has shares worth $0.4M and has options worth $14M. An officer has no shares and has options worth $38.2M. Another officer has shares worth 0.4M and options worth $5.6M. A director has shares worth $0.2M and has options worth $0.5M. A director, Ackerman owns substantial shares worth $3.1B. This is just to give you an idea on insider share ownership and option values.

The 5 year median low, median and high median Price/Earnings per Share Ratios are 13.06, 15.21 and 18.71. The current P/E Ratio is 21.91 based on 2013 earnings of $6.19 and stock price of $135.64. On a relatively basis, the stock price is high.

I get a Graham Price of $67.50 and 10 year low, median and high Price/Graham Price Ratios of 0.81, 0.96 and 1.19. The current P/GP Ratio is 2.01 and this stock test says that the stock price is very high on a relative basis.

The 10 year median Price/Book Value per Share Ratio is 1.78 and the current P/B Ratio at 4.15 is some 132% higher. This stock test also says that the stock price is very high.

The current dividend yield is 1.03% and the 5 year median dividend yield is 1.78 a value some 42% higher. This stock test says that the stock price is relatively high.

When I look at analysts' recommendations, they are all over the place. Recommendations are Strong Buy, Buy, Hold, Underperform and Sell. Most of the recommendations are a Hold and the consensus recommendation would be a Hold. The 12 months consensus stock price is $131. This implies a negative total return of 2.39% with 1.03% from dividends and a capital loss of 3.42%.

There is an article in the G&M by Brenda Bouw about the better investment, CN (TSX-CNR) or CP (TSX-CP). She quotes David Cockfield of Northland Wealth Management who thinks that the market is overpaying for CP and that CN is the current better bet. The blog of Insider Monkey talks about how CP could be a problem for Ackerman and his hedge fund. So far he has done well with this stock, but Insider Monkey wonders if the stock has stalled.

Personally, I think that this stock is overbought and the stock is very expensive at the moment. See my spreadsheet at cp.htm.

This is the second of two parts. The first part was posted on October10, 2013 and is available here.

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.

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 or StockTwits.

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