What Is Canadian Pacific Railway Limited's (TSE:CP) Share Price Doing?

Let's talk about the popular Canadian Pacific Railway Limited (TSE:CP). The company's shares saw significant share price movement during recent months on the TSX, rising to highs of CA$111 and falling to the lows of CA$100. 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 Pacific Railway's current trading price of CA$106 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 Pacific Railway’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Canadian Pacific Railway

What's The Opportunity In Canadian Pacific Railway?

According to my valuation model, Canadian Pacific Railway seems to be fairly priced at around 14.64% above my intrinsic value, which means if you buy Canadian Pacific Railway today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is CA$92.87, then there isn’t really any room for the share price grow beyond what it’s currently trading. What's more, Canadian Pacific Railway’s share price may be more stable over time (relative to the market), as indicated by its low beta.

What kind of growth will Canadian Pacific Railway generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 53% over the next couple of years, the future seems bright for Canadian Pacific Railway. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has already priced in CP’s positive 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 the stock? 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 CP, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that Canadian Pacific Railway has 1 warning sign and it would be unwise to ignore this.

If you are no longer interested in Canadian Pacific Railway, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.