Should You Think About Buying Canadian National Railway Company (TSE:CNR) Now?

Today we're going to take a look at the well-established Canadian National Railway Company (TSE:CNR). The company's stock received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$125 at one point, and dropping to the lows of CA$112. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Canadian National Railway's current trading price of CA$118 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Canadian National Railway’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Canadian National Railway

What's the opportunity in Canadian National Railway?

The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Canadian National Railway’s ratio of 18.96x is trading slightly below its industry peers’ ratio of 19.07x, which means if you buy Canadian National Railway today, you’d be paying a reasonable price for it. And if you believe Canadian National Railway should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. In addition to this, it seems like Canadian National Railway’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Canadian National Railway?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of Canadian National Railway, it is expected to deliver a relatively unexciting earnings growth of 6.3%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What this means for you:

Are you a shareholder? It seems like the market has already priced in CNR’s growth outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at CNR? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on CNR, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Canadian National Railway. You can find everything you need to know about Canadian National Railway in the latest infographic research report. If you are no longer interested in Canadian National Railway, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.