Friday, October 23, 2015

Canadian Pacific Railway 2

Sound bite for Twitter and StockTwits is: Stock is relatively expensive. The things I do not like is the very low dividend yield, the dropping Book Value and the much lower comprehensive income compared to the net income. See my spreadsheet on Canadian Pacific Railway.

I do not own this stock of Canadian Pacific Railway (TSX-CP, NYSE-CP), but I used to. I am following this stock because it is a dividend growth stock. It is one that was on Mike Higgs' list. It is a stock I held from 1987 to 1999 so I am following it. I also held it 2006 to 2011. I decided in 2011 to have only one railway stock and choice CN as my railway stock.

Harrison owns shares worth around $34.8M but only 0.1% of the outstanding shares. However, Ackman has shares worth around $2.7B and some 8.4% of the outstanding shares. In this past year in insider trading, there was insider buying and insider selling with net insider selling at $20M and 0.06% of market cap.

The 5 year low, median and high median Price/Earnings per share Ratios are 18.54, 23.55 and 28.57. The corresponding 10 year values are a lot lower at 12.27, 15.58 and 18.04. The current P/E Ratio is 19.93 based on a stock price of $194.73 and 2015 EPS estimates of $9.77. If you look at the 5 year values this P/E Ratio is reasonable and below the median. However, looking longer term, this P/E Ratio suggests that the stock price is rather expensive.

I get a Graham Price of $72.69. The 10 year Price/Graham Price Ratios are 0.93, 1.12 and 1.31. The current P/GP Ratio is 2.68 based on a stock price of $194.73. This stock price testing suggests that the stock price is relatively expensive.

The 10 year Price/Book Value per Share is 2.07. The current P/B Ratio is 8.10, quite a high number and some 291% above the 10 year P/B Ratio. This stock price testing suggests that the stock price is relatively expensive.

The problem is that book value has been dropping, especially in the last couple of years. (This is mainly because the comprehensive income is a lot lower than the net income.) The Book Value has dropped some 40% between the end of 2013 and the third quarter of 2015.

The current dividend yield is 0.72% based on dividends of $1.40 and a stock price of $194.73. I do not buy stocks with dividends below 1%. The 5 year median dividend yield is 1.77% and the historical median dividend yield is 1.79%. The current dividend yield is some 53% to 59% below the 5 year median and historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The most recommendations are a Buy and the consensus recommendation is a Buy. The 12 month consensus sock price is $215.00. This implies a total return of 11.135 with 0.72% from dividends and $10.41% from capital gains.

The Kristine Owram of the Financial Post had a positive article on this company recently. The site of Dakota Financial News talks about recent analysis recommendations for this company.

This is the second of two parts. The first part was posted on Thursday, October 22, 2015 and is available here. The first part talks about the stock and the second part talks about the stock price.

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 Canadian Pacific Railway.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

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