Intrinsic value of Canadian Pacific Railway Limited - CP

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$210.10

  Intrinsic Value

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  Value-price divergence*

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$210.10

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

We calculate the intrinsic value of CP 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 31.1

 

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, %
  -7.15
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  6,232
  6,357
  6,503
  6,670
  6,858
  7,065
  7,294
  7,542
  7,811
  8,101
  8,411
  8,744
  9,099
  9,477
  9,878
  10,304
  10,756
  11,234
  11,740
  12,274
  12,838
  13,433
  14,060
  14,722
  15,419
  16,153
  16,925
  17,739
  18,595
  19,495
  20,443
Variable operating expenses, $m
 
  3,807
  3,894
  3,994
  4,106
  4,230
  4,366
  4,514
  4,674
  4,847
  5,032
  5,211
  5,422
  5,648
  5,887
  6,141
  6,410
  6,695
  6,996
  7,314
  7,650
  8,005
  8,379
  8,773
  9,188
  9,626
  10,086
  10,571
  11,081
  11,618
  12,183
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
  3,679
  3,807
  3,894
  3,994
  4,106
  4,230
  4,366
  4,514
  4,674
  4,847
  5,032
  5,211
  5,422
  5,648
  5,887
  6,141
  6,410
  6,695
  6,996
  7,314
  7,650
  8,005
  8,379
  8,773
  9,188
  9,626
  10,086
  10,571
  11,081
  11,618
  12,183
Operating income, $m
  2,553
  2,549
  2,608
  2,676
  2,752
  2,836
  2,928
  3,028
  3,137
  3,254
  3,380
  3,533
  3,677
  3,829
  3,991
  4,164
  4,346
  4,539
  4,744
  4,959
  5,187
  5,428
  5,681
  5,948
  6,230
  6,527
  6,839
  7,168
  7,514
  7,877
  8,260
EBITDA, $m
  3,193
  3,213
  3,287
  3,372
  3,466
  3,571
  3,687
  3,812
  3,948
  4,095
  4,252
  4,420
  4,599
  4,790
  4,993
  5,209
  5,437
  5,679
  5,934
  6,204
  6,489
  6,790
  7,107
  7,442
  7,794
  8,165
  8,556
  8,967
  9,399
  9,855
  10,333
Interest expense (income), $m
  488
  476
  493
  512
  533
  557
  584
  613
  645
  680
  717
  757
  800
  846
  894
  946
  1,001
  1,059
  1,120
  1,185
  1,254
  1,327
  1,403
  1,484
  1,569
  1,659
  1,753
  1,853
  1,957
  2,067
  2,183
Earnings before tax, $m
  2,152
  2,073
  2,116
  2,164
  2,219
  2,279
  2,344
  2,415
  2,492
  2,574
  2,662
  2,776
  2,877
  2,984
  3,097
  3,218
  3,345
  3,480
  3,623
  3,774
  3,933
  4,101
  4,278
  4,464
  4,661
  4,868
  5,086
  5,315
  5,556
  5,810
  6,077
Tax expense, $m
  553
  560
  571
  584
  599
  615
  633
  652
  673
  695
  719
  750
  777
  806
  836
  869
  903
  940
  978
  1,019
  1,062
  1,107
  1,155
  1,205
  1,258
  1,314
  1,373
  1,435
  1,500
  1,569
  1,641
Net income, $m
  1,599
  1,513
  1,544
  1,580
  1,620
  1,663
  1,711
  1,763
  1,819
  1,879
  1,944
  2,026
  2,100
  2,178
  2,261
  2,349
  2,442
  2,541
  2,645
  2,755
  2,871
  2,994
  3,123
  3,259
  3,403
  3,554
  3,713
  3,880
  4,056
  4,241
  4,436

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  164
  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
  19,221
  19,439
  19,886
  20,397
  20,971
  21,607
  22,305
  23,064
  23,886
  24,772
  25,723
  26,740
  27,825
  28,981
  30,209
  31,512
  32,893
  34,355
  35,901
  37,534
  39,259
  41,078
  42,997
  45,020
  47,152
  49,396
  51,760
  54,247
  56,865
  59,619
  62,516
Adjusted assets (=assets-cash), $m
  19,057
  19,439
  19,886
  20,397
  20,971
  21,607
  22,305
  23,064
  23,886
  24,772
  25,723
  26,740
  27,825
  28,981
  30,209
  31,512
  32,893
  34,355
  35,901
  37,534
  39,259
  41,078
  42,997
  45,020
  47,152
  49,396
  51,760
  54,247
  56,865
  59,619
  62,516
Revenue / Adjusted assets
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
Average production assets, $m
  16,493
  16,826
  17,213
  17,655
  18,152
  18,702
  19,306
  19,964
  20,675
  21,442
  22,265
  23,145
  24,085
  25,085
  26,148
  27,276
  28,471
  29,736
  31,075
  32,488
  33,981
  35,556
  37,217
  38,968
  40,813
  42,756
  44,802
  46,955
  49,221
  51,605
  54,112
Working capital, $m
  -338
  -489
  -501
  -514
  -528
  -544
  -562
  -581
  -601
  -624
  -648
  -673
  -701
  -730
  -761
  -793
  -828
  -865
  -904
  -945
  -988
  -1,034
  -1,083
  -1,134
  -1,187
  -1,244
  -1,303
  -1,366
  -1,432
  -1,501
  -1,574
Total debt, $m
  8,684
  8,960
  9,302
  9,693
  10,132
  10,618
  11,152
  11,733
  12,362
  13,040
  13,767
  14,545
  15,375
  16,259
  17,199
  18,196
  19,252
  20,370
  21,553
  22,803
  24,122
  25,514
  26,982
  28,530
  30,160
  31,877
  33,685
  35,588
  37,591
  39,698
  41,914
Total liabilities, $m
  14,595
  14,871
  15,213
  15,604
  16,043
  16,529
  17,063
  17,644
  18,273
  18,951
  19,678
  20,456
  21,286
  22,170
  23,110
  24,107
  25,163
  26,281
  27,464
  28,714
  30,033
  31,425
  32,893
  34,441
  36,071
  37,788
  39,596
  41,499
  43,502
  45,609
  47,825
Total equity, $m
  4,626
  4,568
  4,673
  4,793
  4,928
  5,078
  5,242
  5,420
  5,613
  5,822
  6,045
  6,284
  6,539
  6,811
  7,099
  7,405
  7,730
  8,073
  8,437
  8,821
  9,226
  9,653
  10,104
  10,580
  11,081
  11,608
  12,164
  12,748
  13,363
  14,011
  14,691
Total liabilities and equity, $m
  19,221
  19,439
  19,886
  20,397
  20,971
  21,607
  22,305
  23,064
  23,886
  24,773
  25,723
  26,740
  27,825
  28,981
  30,209
  31,512
  32,893
  34,354
  35,901
  37,535
  39,259
  41,078
  42,997
  45,021
  47,152
  49,396
  51,760
  54,247
  56,865
  59,620
  62,516
Debt-to-equity ratio
  1.877
  1.960
  1.990
  2.020
  2.060
  2.090
  2.130
  2.160
  2.200
  2.240
  2.280
  2.310
  2.350
  2.390
  2.420
  2.460
  2.490
  2.520
  2.550
  2.590
  2.610
  2.640
  2.670
  2.700
  2.720
  2.750
  2.770
  2.790
  2.810
  2.830
  2.850
Adjusted equity ratio
  0.234
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,599
  1,513
  1,544
  1,580
  1,620
  1,663
  1,711
  1,763
  1,819
  1,879
  1,944
  2,026
  2,100
  2,178
  2,261
  2,349
  2,442
  2,541
  2,645
  2,755
  2,871
  2,994
  3,123
  3,259
  3,403
  3,554
  3,713
  3,880
  4,056
  4,241
  4,436
Depreciation, amort., depletion, $m
  640
  664
  679
  696
  715
  736
  759
  784
  811
  841
  872
  887
  923
  961
  1,002
  1,045
  1,091
  1,139
  1,191
  1,245
  1,302
  1,362
  1,426
  1,493
  1,564
  1,638
  1,717
  1,799
  1,886
  1,977
  2,073
Funds from operations, $m
  2,034
  2,177
  2,223
  2,276
  2,334
  2,399
  2,470
  2,547
  2,630
  2,720
  2,816
  2,913
  3,023
  3,139
  3,263
  3,394
  3,533
  3,680
  3,835
  4,000
  4,173
  4,356
  4,549
  4,752
  4,966
  5,192
  5,429
  5,679
  5,942
  6,218
  6,509
Change in working capital, $m
  -55
  -10
  -11
  -13
  -14
  -16
  -18
  -19
  -21
  -22
  -24
  -26
  -27
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -54
  -57
  -60
  -63
  -66
  -69
  -73
Cash from operations, $m
  2,089
  2,394
  2,234
  2,288
  2,349
  2,415
  2,487
  2,566
  2,651
  2,742
  2,840
  2,939
  3,050
  3,168
  3,294
  3,427
  3,568
  3,717
  3,874
  4,041
  4,217
  4,402
  4,597
  4,803
  5,020
  5,248
  5,489
  5,742
  6,008
  6,288
  6,582
Maintenance CAPEX, $m
  0
  -632
  -645
  -660
  -676
  -695
  -717
  -740
  -765
  -792
  -822
  -853
  -887
  -923
  -961
  -1,002
  -1,045
  -1,091
  -1,139
  -1,191
  -1,245
  -1,302
  -1,362
  -1,426
  -1,493
  -1,564
  -1,638
  -1,717
  -1,799
  -1,886
  -1,977
New CAPEX, $m
  -1,182
  -333
  -387
  -442
  -497
  -550
  -604
  -658
  -712
  -767
  -823
  -880
  -939
  -1,000
  -1,063
  -1,128
  -1,195
  -1,265
  -1,338
  -1,414
  -1,493
  -1,575
  -1,661
  -1,751
  -1,845
  -1,943
  -2,046
  -2,153
  -2,266
  -2,384
  -2,507
Cash from investing activities, $m
  -1,069
  -965
  -1,032
  -1,102
  -1,173
  -1,245
  -1,321
  -1,398
  -1,477
  -1,559
  -1,645
  -1,733
  -1,826
  -1,923
  -2,024
  -2,130
  -2,240
  -2,356
  -2,477
  -2,605
  -2,738
  -2,877
  -3,023
  -3,177
  -3,338
  -3,507
  -3,684
  -3,870
  -4,065
  -4,270
  -4,484
Free cash flow, $m
  1,020
  1,429
  1,203
  1,187
  1,176
  1,169
  1,167
  1,169
  1,174
  1,183
  1,195
  1,205
  1,224
  1,245
  1,270
  1,297
  1,327
  1,361
  1,397
  1,436
  1,479
  1,525
  1,574
  1,626
  1,682
  1,742
  1,805
  1,872
  1,943
  2,018
  2,098
Issuance/(repayment) of debt, $m
  -46
  301
  342
  391
  439
  486
  534
  581
  629
  678
  727
  778
  830
  884
  939
  997
  1,056
  1,118
  1,183
  1,250
  1,319
  1,392
  1,468
  1,547
  1,630
  1,717
  1,808
  1,903
  2,003
  2,107
  2,216
Issuance/(repurchase) of shares, $m
  -1,189
  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  
  -1,238
  301
  342
  391
  439
  486
  534
  581
  629
  678
  727
  778
  830
  884
  939
  997
  1,056
  1,118
  1,183
  1,250
  1,319
  1,392
  1,468
  1,547
  1,630
  1,717
  1,808
  1,903
  2,003
  2,107
  2,216
Total cash flow (excl. dividends), $m
  -231
  1,730
  1,545
  1,578
  1,615
  1,656
  1,701
  1,750
  1,803
  1,861
  1,923
  1,984
  2,054
  2,129
  2,209
  2,294
  2,384
  2,479
  2,580
  2,686
  2,798
  2,917
  3,042
  3,174
  3,313
  3,459
  3,613
  3,775
  3,945
  4,125
  4,314
Retained Cash Flow (-), $m
  170
  -81
  -105
  -120
  -135
  -149
  -164
  -179
  -193
  -208
  -223
  -239
  -255
  -272
  -289
  -306
  -325
  -344
  -363
  -384
  -405
  -428
  -451
  -475
  -501
  -528
  -555
  -585
  -615
  -647
  -681
Prev. year cash balance distribution, $m
 
  139
  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
 
  1,788
  1,440
  1,457
  1,480
  1,506
  1,537
  1,571
  1,610
  1,653
  1,699
  1,744
  1,799
  1,858
  1,921
  1,988
  2,059
  2,135
  2,216
  2,302
  2,393
  2,489
  2,591
  2,698
  2,812
  2,931
  3,057
  3,190
  3,330
  3,478
  3,633
Discount rate, %
 
  8.80
  9.24
  9.70
  10.19
  10.70
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
  21.18
  22.24
  23.35
  24.52
  25.74
  27.03
  28.38
  29.80
  31.29
  32.85
  34.50
  36.22
PV of cash for distribution, $m
 
  1,643
  1,206
  1,104
  1,004
  906
  811
  720
  633
  550
  473
  400
  334
  276
  224
  179
  140
  108
  81
  60
  43
  30
  21
  14
  9
  6
  3
  2
  1
  1
  0
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 Pacific Railway Limited, together with its subsidiaries, operates a transcontinental railway in Canada and the United States. It transports bulk commodities, including grain, coal, potash, fertilizers, and sulphur; and merchandise freight comprising finished vehicles and automotive parts, chemicals and plastics, crude oil, as well as petroleum, forest, industrial, metals, minerals, and consumer products. The company also transports intermodal traffic consisting of retail goods in overseas containers that can be transported by train, ship, and truck, as well as in domestic containers and trailers that can be moved by train and truck. It offers rail and intermodal transportation services over a track network of approximately 12,500 miles, serving the business centers of Canada from Montreal, Quebec, to Vancouver, British Columbia, and the United States Midwest and Northeast regions. In addition, the company provides truck-rail transload facilities and logistics services. Canadian Pacific Railway Limited was founded in 1881 and is headquartered in Calgary, Canada.

FINANCIAL RATIOS  of  Canadian Pacific Railway Limited (CP)

Valuation Ratios
P/E Ratio 19.2
Price to Sales 4.9
Price to Book 6.6
Price to Tangible Book
Price to Cash Flow 14.7
Price to Free Cash Flow 33.9
Growth Rates
Sales Growth Rate -7.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -22.3%
Cap. Spend. - 3 Yr. Gr. Rate -0.9%
Financial Strength
Quick Ratio 7
Current Ratio 0.1
LT Debt to Equity 187.2%
Total Debt to Equity 187.7%
Interest Coverage 5
Management Effectiveness
Return On Assets 10.1%
Ret/ On Assets - 3 Yr. Avg. 9.6%
Return On Total Capital 11.8%
Ret/ On T. Cap. - 3 Yr. Avg. 11.7%
Return On Equity 33.9%
Return On Equity - 3 Yr. Avg. 27.7%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 88%
Gross Margin - 3 Yr. Avg. 85.3%
EBITDA Margin 52.6%
EBITDA Margin - 3 Yr. Avg. 46.5%
Operating Margin 41%
Oper. Margin - 3 Yr. Avg. 38.8%
Pre-Tax Margin 34.5%
Pre-Tax Margin - 3 Yr. Avg. 31.5%
Net Profit Margin 25.7%
Net Profit Margin - 3 Yr. Avg. 22.7%
Effective Tax Rate 25.7%
Eff/ Tax Rate - 3 Yr. Avg. 28.1%
Payout Ratio 15.9%

CP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CP stock intrinsic value calculation we used $6232 million for the last fiscal year's total revenue generated by Canadian Pacific Railway Limited. The default revenue input number comes from 2016 income statement of Canadian Pacific Railway Limited. 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 CP stock valuation model: a) initial revenue growth rate of 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 8.8%, whose default value for CP is calculated based on our internal credit rating of Canadian Pacific Railway Limited, 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 Pacific Railway Limited.
    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 CP stock the variable cost ratio is equal to 59.9%.

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 CP 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 5.5% for Canadian Pacific Railway Limited.

Corporate tax rate of 27% is the nominal tax rate for Canadian Pacific Railway Limited. 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 CP 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 CP are equal to 264.7%.

Life of production assets of 26.1 years is the average useful life of capital assets used in Canadian Pacific Railway Limited 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 CP is equal to -7.7%. 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 - $4626 million for Canadian Pacific Railway Limited - 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 148.186 million for Canadian Pacific Railway Limited 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 Pacific Railway Limited at the current share price and the inputted number of shares is $31.1 billion.


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Stock chart of CP Financial statements of CP
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