Intrinsic value of Canadian National Railway Company - CNR

Previous Close

$101.38

  Intrinsic Value

$35.45

stock screener

  Rating & Target

str. sell

-65%

  Value-price divergence*

+5%

Previous close

$101.38

 
Intrinsic value

$35.45

 
Up/down potential

-65%

 
Rating

str. sell

 
Value-price divergence*

+5%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of CNR stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 78.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -4.55
  8.20
  7.88
  7.59
  7.33
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
Revenue, $m
  12,037
  13,024
  14,050
  15,117
  16,226
  17,377
  18,575
  19,819
  21,114
  22,460
  23,862
  25,321
  26,841
  28,426
  30,078
  31,803
  33,602
  35,482
  37,445
  39,497
  41,643
  43,887
  46,235
  48,692
  51,265
  53,959
  56,781
  59,737
  62,835
  66,082
  69,486
Variable operating expenses, $m
 
  7,580
  8,177
  8,798
  9,443
  10,114
  10,810
  11,535
  12,288
  13,072
  13,887
  14,737
  15,622
  16,544
  17,506
  18,509
  19,556
  20,650
  21,793
  22,987
  24,236
  25,542
  26,909
  28,339
  29,836
  31,404
  33,047
  34,767
  36,570
  38,460
  40,441
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  6,725
  7,580
  8,177
  8,798
  9,443
  10,114
  10,810
  11,535
  12,288
  13,072
  13,887
  14,737
  15,622
  16,544
  17,506
  18,509
  19,556
  20,650
  21,793
  22,987
  24,236
  25,542
  26,909
  28,339
  29,836
  31,404
  33,047
  34,767
  36,570
  38,460
  40,441
Operating income, $m
  5,312
  5,444
  5,873
  6,319
  6,782
  7,264
  7,764
  8,284
  8,825
  9,388
  9,974
  10,584
  11,220
  11,882
  12,573
  13,293
  14,046
  14,831
  15,652
  16,510
  17,407
  18,345
  19,326
  20,353
  21,429
  22,555
  23,734
  24,970
  26,265
  27,622
  29,045
EBITDA, $m
  6,537
  6,772
  7,306
  7,860
  8,437
  9,036
  9,658
  10,305
  10,978
  11,678
  12,407
  13,166
  13,956
  14,780
  15,639
  16,536
  17,472
  18,449
  19,470
  20,537
  21,652
  22,819
  24,040
  25,318
  26,655
  28,056
  29,524
  31,061
  32,672
  34,360
  36,130
Interest expense (income), $m
  470
  473
  555
  638
  724
  813
  906
  1,003
  1,103
  1,208
  1,317
  1,430
  1,547
  1,670
  1,798
  1,931
  2,071
  2,216
  2,367
  2,526
  2,692
  2,865
  3,046
  3,235
  3,434
  3,641
  3,859
  4,087
  4,325
  4,575
  4,837
Earnings before tax, $m
  4,927
  4,971
  5,318
  5,681
  6,058
  6,450
  6,858
  7,282
  7,722
  8,181
  8,658
  9,155
  9,672
  10,212
  10,775
  11,362
  11,975
  12,615
  13,284
  13,984
  14,715
  15,480
  16,280
  17,118
  17,995
  18,913
  19,876
  20,884
  21,940
  23,047
  24,208
Tax expense, $m
  1,287
  1,342
  1,436
  1,534
  1,636
  1,742
  1,852
  1,966
  2,085
  2,209
  2,338
  2,472
  2,611
  2,757
  2,909
  3,068
  3,233
  3,406
  3,587
  3,776
  3,973
  4,180
  4,396
  4,622
  4,859
  5,107
  5,366
  5,639
  5,924
  6,223
  6,536
Net income, $m
  3,640
  3,629
  3,882
  4,147
  4,423
  4,709
  5,006
  5,316
  5,637
  5,972
  6,320
  6,683
  7,061
  7,455
  7,866
  8,294
  8,742
  9,209
  9,698
  10,208
  10,742
  11,300
  11,885
  12,496
  13,136
  13,807
  14,509
  15,245
  16,016
  16,824
  17,672

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  176
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  37,057
  39,951
  43,099
  46,371
  49,772
  53,305
  56,978
  60,795
  64,766
  68,896
  73,195
  77,672
  82,335
  87,196
  92,265
  97,554
  103,074
  108,839
  114,862
  121,157
  127,738
  134,622
  141,824
  149,363
  157,254
  165,518
  174,175
  183,244
  192,747
  202,707
  213,148
Adjusted assets (=assets-cash), $m
  36,881
  39,951
  43,099
  46,371
  49,772
  53,305
  56,978
  60,795
  64,766
  68,896
  73,195
  77,672
  82,335
  87,196
  92,265
  97,554
  103,074
  108,839
  114,862
  121,157
  127,738
  134,622
  141,824
  149,363
  157,254
  165,518
  174,175
  183,244
  192,747
  202,707
  213,148
Revenue / Adjusted assets
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
Average production assets, $m
  33,259
  35,985
  38,821
  41,768
  44,831
  48,014
  51,322
  54,761
  58,337
  62,057
  65,930
  69,962
  74,162
  78,541
  83,107
  87,870
  92,843
  98,035
  103,460
  109,130
  115,059
  121,259
  127,747
  134,537
  141,645
  149,089
  156,886
  165,054
  173,614
  182,586
  191,990
Working capital, $m
  -901
  443
  478
  514
  552
  591
  632
  674
  718
  764
  811
  861
  913
  966
  1,023
  1,081
  1,142
  1,206
  1,273
  1,343
  1,416
  1,492
  1,572
  1,656
  1,743
  1,835
  1,931
  2,031
  2,136
  2,247
  2,363
Total debt, $m
  10,937
  12,612
  14,494
  16,451
  18,484
  20,597
  22,794
  25,077
  27,451
  29,921
  32,492
  35,169
  37,957
  40,864
  43,895
  47,058
  50,359
  53,807
  57,408
  61,173
  65,108
  69,225
  73,532
  78,040
  82,759
  87,701
  92,877
  98,301
  103,984
  109,940
  116,183
Total liabilities, $m
  22,216
  23,891
  25,773
  27,730
  29,763
  31,876
  34,073
  36,356
  38,730
  41,200
  43,771
  46,448
  49,236
  52,143
  55,174
  58,337
  61,638
  65,086
  68,687
  72,452
  76,387
  80,504
  84,811
  89,319
  94,038
  98,980
  104,156
  109,580
  115,263
  121,219
  127,462
Total equity, $m
  14,841
  16,060
  17,326
  18,641
  20,008
  21,429
  22,905
  24,440
  26,036
  27,696
  29,424
  31,224
  33,099
  35,053
  37,091
  39,217
  41,436
  43,753
  46,174
  48,705
  51,351
  54,118
  57,013
  60,044
  63,216
  66,538
  70,018
  73,664
  77,484
  81,488
  85,685
Total liabilities and equity, $m
  37,057
  39,951
  43,099
  46,371
  49,771
  53,305
  56,978
  60,796
  64,766
  68,896
  73,195
  77,672
  82,335
  87,196
  92,265
  97,554
  103,074
  108,839
  114,861
  121,157
  127,738
  134,622
  141,824
  149,363
  157,254
  165,518
  174,174
  183,244
  192,747
  202,707
  213,147
Debt-to-equity ratio
  0.737
  0.790
  0.840
  0.880
  0.920
  0.960
  1.000
  1.030
  1.050
  1.080
  1.100
  1.130
  1.150
  1.170
  1.180
  1.200
  1.220
  1.230
  1.240
  1.260
  1.270
  1.280
  1.290
  1.300
  1.310
  1.320
  1.330
  1.330
  1.340
  1.350
  1.360
Adjusted equity ratio
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3,640
  3,629
  3,882
  4,147
  4,423
  4,709
  5,006
  5,316
  5,637
  5,972
  6,320
  6,683
  7,061
  7,455
  7,866
  8,294
  8,742
  9,209
  9,698
  10,208
  10,742
  11,300
  11,885
  12,496
  13,136
  13,807
  14,509
  15,245
  16,016
  16,824
  17,672
Depreciation, amort., depletion, $m
  1,225
  1,328
  1,433
  1,541
  1,654
  1,772
  1,894
  2,021
  2,153
  2,290
  2,433
  2,582
  2,737
  2,898
  3,067
  3,242
  3,426
  3,618
  3,818
  4,027
  4,246
  4,475
  4,714
  4,964
  5,227
  5,501
  5,789
  6,091
  6,406
  6,737
  7,085
Funds from operations, $m
  4,911
  4,956
  5,315
  5,689
  6,077
  6,481
  6,900
  7,336
  7,790
  8,262
  8,753
  9,264
  9,797
  10,353
  10,932
  11,537
  12,168
  12,827
  13,515
  14,235
  14,988
  15,775
  16,598
  17,461
  18,363
  19,308
  20,298
  21,336
  22,423
  23,562
  24,756
Change in working capital, $m
  -291
  34
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  76
  80
  84
  87
  92
  96
  101
  105
  110
  116
Cash from operations, $m
  5,202
  4,923
  5,280
  5,652
  6,039
  6,441
  6,859
  7,294
  7,746
  8,216
  8,705
  9,215
  9,746
  10,299
  10,876
  11,478
  12,107
  12,763
  13,449
  14,165
  14,915
  15,699
  16,519
  17,377
  18,276
  19,217
  20,202
  21,235
  22,317
  23,452
  24,641
Maintenance CAPEX, $m
  0
  -1,227
  -1,328
  -1,433
  -1,541
  -1,654
  -1,772
  -1,894
  -2,021
  -2,153
  -2,290
  -2,433
  -2,582
  -2,737
  -2,898
  -3,067
  -3,242
  -3,426
  -3,618
  -3,818
  -4,027
  -4,246
  -4,475
  -4,714
  -4,964
  -5,227
  -5,501
  -5,789
  -6,091
  -6,406
  -6,737
New CAPEX, $m
  -2,695
  -2,727
  -2,836
  -2,947
  -3,063
  -3,183
  -3,308
  -3,439
  -3,576
  -3,720
  -3,872
  -4,032
  -4,201
  -4,378
  -4,566
  -4,764
  -4,972
  -5,193
  -5,425
  -5,670
  -5,928
  -6,201
  -6,488
  -6,790
  -7,108
  -7,444
  -7,797
  -8,169
  -8,560
  -8,971
  -9,404
Cash from investing activities, $m
  -2,655
  -3,954
  -4,164
  -4,380
  -4,604
  -4,837
  -5,080
  -5,333
  -5,597
  -5,873
  -6,162
  -6,465
  -6,783
  -7,115
  -7,464
  -7,831
  -8,214
  -8,619
  -9,043
  -9,488
  -9,955
  -10,447
  -10,963
  -11,504
  -12,072
  -12,671
  -13,298
  -13,958
  -14,651
  -15,377
  -16,141
Free cash flow, $m
  2,547
  969
  1,116
  1,272
  1,435
  1,604
  1,780
  1,961
  2,149
  2,343
  2,543
  2,750
  2,963
  3,184
  3,412
  3,648
  3,892
  4,144
  4,406
  4,678
  4,960
  5,252
  5,557
  5,873
  6,203
  6,546
  6,904
  7,277
  7,667
  8,074
  8,499
Issuance/(repayment) of debt, $m
  691
  1,851
  1,883
  1,957
  2,033
  2,113
  2,196
  2,283
  2,374
  2,470
  2,571
  2,677
  2,789
  2,907
  3,031
  3,163
  3,301
  3,447
  3,602
  3,764
  3,936
  4,117
  4,307
  4,508
  4,719
  4,942
  5,176
  5,423
  5,683
  5,956
  6,244
Issuance/(repurchase) of shares, $m
  -2,006
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -1,380
  1,851
  1,883
  1,957
  2,033
  2,113
  2,196
  2,283
  2,374
  2,470
  2,571
  2,677
  2,789
  2,907
  3,031
  3,163
  3,301
  3,447
  3,602
  3,764
  3,936
  4,117
  4,307
  4,508
  4,719
  4,942
  5,176
  5,423
  5,683
  5,956
  6,244
Total cash flow (excl. dividends), $m
  1,182
  2,819
  2,999
  3,229
  3,469
  3,717
  3,976
  4,244
  4,523
  4,813
  5,114
  5,427
  5,752
  6,091
  6,443
  6,810
  7,193
  7,592
  8,008
  8,442
  8,895
  9,369
  9,864
  10,381
  10,922
  11,488
  12,080
  12,700
  13,350
  14,030
  14,742
Retained Cash Flow (-), $m
  109
  -1,219
  -1,266
  -1,315
  -1,367
  -1,420
  -1,476
  -1,535
  -1,596
  -1,660
  -1,728
  -1,800
  -1,875
  -1,954
  -2,038
  -2,126
  -2,219
  -2,317
  -2,421
  -2,530
  -2,646
  -2,767
  -2,895
  -3,030
  -3,172
  -3,322
  -3,480
  -3,646
  -3,820
  -4,004
  -4,197
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  1,600
  1,733
  1,914
  2,102
  2,297
  2,500
  2,710
  2,927
  3,152
  3,386
  3,627
  3,877
  4,137
  4,406
  4,684
  4,974
  5,274
  5,587
  5,911
  6,250
  6,602
  6,968
  7,351
  7,750
  8,166
  8,601
  9,055
  9,529
  10,026
  10,545
Discount rate, %
 
  5.40
  5.67
  5.95
  6.25
  6.56
  6.89
  7.24
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.18
  10.69
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.04
  15.80
  16.59
  17.42
  18.29
  19.20
  20.16
  21.17
  22.23
PV of cash for distribution, $m
 
  1,518
  1,552
  1,609
  1,649
  1,671
  1,676
  1,661
  1,629
  1,580
  1,514
  1,435
  1,343
  1,242
  1,133
  1,021
  906
  793
  684
  580
  484
  397
  319
  252
  195
  148
  109
  79
  56
  38
  26
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Canadian National Railway Company engages in rail and related transportation business. The company transports cargo serving exporters, importers, retailers, farmers, and manufacturers. It operates a network of approximately 20,000 route miles of track spans Canada and mid-America connecting the Atlantic, the Pacific, and the Gulf of Mexico. The company serves the cities and ports of Vancouver, Prince Rupert (British Columbia), Montreal, Halifax, New Orleans, and Mobile (Alabama), as well as the metropolitan areas of Toronto, Edmonton, Winnipeg, Calgary, Chicago, Memphis, Detroit, Duluth (Minnesota)/Superior (Wisconsin), and Jackson (Mississippi) with connections to various points in North America. Canadian National Railway Company was founded in 1919 and is headquartered in Montreal, Canada.

FINANCIAL RATIOS  of  Canadian National Railway Company (CNR)

Valuation Ratios
P/E Ratio 21.2
Price to Sales 6.4
Price to Book 5.2
Price to Tangible Book
Price to Cash Flow 14.9
Price to Free Cash Flow 30.8
Growth Rates
Sales Growth Rate -4.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -0.4%
Cap. Spend. - 3 Yr. Gr. Rate 6.4%
Financial Strength
Quick Ratio 0
Current Ratio 0.2
LT Debt to Equity 63.7%
Total Debt to Equity 73.7%
Interest Coverage 11
Management Effectiveness
Return On Assets 10.9%
Ret/ On Assets - 3 Yr. Avg. 11.1%
Return On Total Capital 14.2%
Ret/ On T. Cap. - 3 Yr. Avg. 14.7%
Return On Equity 24.4%
Return On Equity - 3 Yr. Avg. 24.4%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 78%
Gross Margin - 3 Yr. Avg. 75.3%
EBITDA Margin 55%
EBITDA Margin - 3 Yr. Avg. 51.4%
Operating Margin 44.1%
Oper. Margin - 3 Yr. Avg. 41.3%
Pre-Tax Margin 40.9%
Pre-Tax Margin - 3 Yr. Avg. 38.5%
Net Profit Margin 30.2%
Net Profit Margin - 3 Yr. Avg. 28.1%
Effective Tax Rate 26.1%
Eff/ Tax Rate - 3 Yr. Avg. 27%
Payout Ratio 31.8%

CNR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CNR stock intrinsic value calculation we used $12037 million for the last fiscal year's total revenue generated by Canadian National Railway Company. The default revenue input number comes from 2016 income statement of Canadian National Railway Company. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our CNR stock valuation model: a) initial revenue growth rate of 8.2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 5.4%, whose default value for CNR is calculated based on our internal credit rating of Canadian National Railway Company, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Canadian National Railway Company.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of CNR stock the variable cost ratio is equal to 58.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for CNR stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.4% for Canadian National Railway Company.

Corporate tax rate of 27% is the nominal tax rate for Canadian National Railway Company. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the CNR stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for CNR are equal to 276.3%.

Life of production assets of 27.1 years is the average useful life of capital assets used in Canadian National Railway Company operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for CNR is equal to 3.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $14841 million for Canadian National Railway Company - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 771.382 million for Canadian National Railway Company is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Canadian National Railway Company at the current share price and the inputted number of shares is $78.2 billion.

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Stock chart of CNR Financial statements of CNR
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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