Shares of Canadian Pacific Railway (
CP Quick Quote CP - Free Report) have been strong performers lately, with the stock up 10.3% over the past month. The stock hit a new 52-week high of $280.76 in the previous session. Canadian Pacific Railway has gained 9.9% since the start of the year compared to the -6.4% move for the Zacks Transportation sector and the 2.9% return for the Zacks Transportation - Rail industry. What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on July 22, 2020, Canadian Pacific reported EPS of $2.94 versus consensus estimate of $2.75.
For the current fiscal year, Canadian Pacific is expected to post earnings of $12.89 per share on $5.75 billion in revenues. This represents a 4.04% change in EPS on a -2.01% change in revenues. For the next fiscal year, the company is expected to earn $14.32 per share on $6.09 billion in revenues. This represents a year-over-year change of 11.09% and 5.9%, respectively.
Canadian Pacific may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
Canadian Pacific has a Value Score of B. The stock's Growth and Momentum Scores are C and B, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 21.8X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 17X versus its peer group's average of 12.9X. Additionally, the stock has a PEG ratio of 2.72. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Canadian Pacific currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Canadian Pacific meets the list of requirements. Thus, it seems as though Canadian Pacific shares could have a bit more room to run in the near term.
How Does Canadian Pacific Stack Up to the Competition?
Shares of Canadian Pacific have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also solid potential picks, including Canadian National Railway (
CNI Quick Quote CNI - Free Report) , DSV AS UNS ( DSDVY Quick Quote DSDVY - Free Report) , and Landstar System ( LSTR Quick Quote LSTR - Free Report) , all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
However, it is worth noting that the Zacks Industry Rank for this group is in the bottom half of the ranking, so it isn't all good news for Canadian Pacific. Still, the fundamentals for Canadian Pacific are promising, and it still has potential despite being at a 52-week high.