Intrinsic value of Canadian National Railway - CNI

Previous Close

$79.50

  Intrinsic Value

$27.16

stock screener

  Rating & Target

str. sell

-66%

  Value-price divergence*

-13%

Previous close

$79.50

 
Intrinsic value

$27.16

 
Up/down potential

-66%

 
Rating

str. sell

 
Value-price divergence*

-13%

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

We calculate the intrinsic value of CNI 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 59.3

 

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
  8,909
  9,640
  10,399
  11,189
  12,009
  12,862
  13,748
  14,669
  15,627
  16,624
  17,661
  18,741
  19,866
  21,039
  22,262
  23,538
  24,870
  26,261
  27,714
  29,233
  30,821
  32,482
  34,220
  36,039
  37,943
  39,937
  42,026
  44,214
  46,507
  48,910
  51,429
Variable operating expenses, $m
 
  5,610
  6,052
  6,512
  6,989
  7,485
  8,001
  8,537
  9,095
  9,675
  10,279
  10,907
  11,562
  12,245
  12,957
  13,699
  14,474
  15,284
  16,130
  17,014
  17,938
  18,905
  19,916
  20,975
  22,083
  23,243
  24,459
  25,732
  27,067
  28,466
  29,932
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
  4,977
  5,610
  6,052
  6,512
  6,989
  7,485
  8,001
  8,537
  9,095
  9,675
  10,279
  10,907
  11,562
  12,245
  12,957
  13,699
  14,474
  15,284
  16,130
  17,014
  17,938
  18,905
  19,916
  20,975
  22,083
  23,243
  24,459
  25,732
  27,067
  28,466
  29,932
Operating income, $m
  3,932
  4,029
  4,347
  4,677
  5,020
  5,376
  5,747
  6,132
  6,532
  6,949
  7,382
  7,834
  8,304
  8,794
  9,306
  9,839
  10,396
  10,977
  11,585
  12,219
  12,883
  13,578
  14,304
  15,064
  15,860
  16,694
  17,567
  18,481
  19,440
  20,444
  21,497
EBITDA, $m
  4,839
  5,012
  5,407
  5,818
  6,244
  6,687
  7,148
  7,627
  8,125
  8,644
  9,183
  9,744
  10,330
  10,939
  11,575
  12,239
  12,931
  13,655
  14,410
  15,200
  16,026
  16,889
  17,793
  18,739
  19,729
  20,765
  21,851
  22,989
  24,181
  25,431
  26,741
Interest expense (income), $m
  348
  350
  411
  472
  536
  602
  671
  742
  817
  894
  974
  1,058
  1,145
  1,236
  1,331
  1,429
  1,532
  1,640
  1,752
  1,870
  1,992
  2,120
  2,254
  2,395
  2,541
  2,695
  2,856
  3,025
  3,201
  3,386
  3,580
Earnings before tax, $m
  3,647
  3,679
  3,936
  4,205
  4,484
  4,774
  5,076
  5,389
  5,715
  6,055
  6,408
  6,776
  7,159
  7,558
  7,975
  8,409
  8,863
  9,337
  9,832
  10,350
  10,891
  11,457
  12,050
  12,670
  13,319
  13,999
  14,711
  15,457
  16,239
  17,058
  17,917
Tax expense, $m
  953
  993
  1,063
  1,135
  1,211
  1,289
  1,370
  1,455
  1,543
  1,635
  1,730
  1,829
  1,933
  2,041
  2,153
  2,271
  2,393
  2,521
  2,655
  2,794
  2,941
  3,093
  3,253
  3,421
  3,596
  3,780
  3,972
  4,173
  4,384
  4,606
  4,838
Net income, $m
  2,694
  2,686
  2,873
  3,070
  3,273
  3,485
  3,705
  3,934
  4,172
  4,420
  4,678
  4,946
  5,226
  5,517
  5,822
  6,139
  6,470
  6,816
  7,178
  7,555
  7,951
  8,364
  8,796
  9,249
  9,723
  10,219
  10,739
  11,283
  11,854
  12,452
  13,079

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  130
  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
  27,428
  29,569
  31,899
  34,321
  36,838
  39,453
  42,171
  44,997
  47,935
  50,992
  54,174
  57,487
  60,939
  64,537
  68,289
  72,203
  76,289
  80,556
  85,013
  89,672
  94,543
  99,638
  104,969
  110,548
  116,389
  122,506
  128,913
  135,625
  142,658
  150,030
  157,758
Adjusted assets (=assets-cash), $m
  27,298
  29,569
  31,899
  34,321
  36,838
  39,453
  42,171
  44,997
  47,935
  50,992
  54,174
  57,487
  60,939
  64,537
  68,289
  72,203
  76,289
  80,556
  85,013
  89,672
  94,543
  99,638
  104,969
  110,548
  116,389
  122,506
  128,913
  135,625
  142,658
  150,030
  157,758
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
  24,617
  26,634
  28,733
  30,914
  33,181
  35,537
  37,985
  40,530
  43,177
  45,931
  48,797
  51,781
  54,890
  58,131
  61,510
  65,036
  68,716
  72,559
  76,575
  80,771
  85,159
  89,748
  94,550
  99,575
  104,836
  110,346
  116,117
  122,162
  128,498
  135,138
  142,099
Working capital, $m
  -667
  328
  354
  380
  408
  437
  467
  499
  531
  565
  600
  637
  675
  715
  757
  800
  846
  893
  942
  994
  1,048
  1,104
  1,163
  1,225
  1,290
  1,358
  1,429
  1,503
  1,581
  1,663
  1,749
Total debt, $m
  8,095
  9,334
  10,728
  12,176
  13,681
  15,245
  16,870
  18,560
  20,317
  22,145
  24,048
  26,029
  28,094
  30,245
  32,489
  34,829
  37,273
  39,824
  42,490
  45,276
  48,189
  51,236
  54,424
  57,760
  61,253
  64,911
  68,742
  72,756
  76,962
  81,370
  85,991
Total liabilities, $m
  16,443
  17,682
  19,076
  20,524
  22,029
  23,593
  25,218
  26,908
  28,665
  30,493
  32,396
  34,377
  36,442
  38,593
  40,837
  43,177
  45,621
  48,172
  50,838
  53,624
  56,537
  59,584
  62,772
  66,108
  69,601
  73,259
  77,090
  81,104
  85,310
  89,718
  94,339
Total equity, $m
  10,985
  11,887
  12,823
  13,797
  14,809
  15,860
  16,953
  18,089
  19,270
  20,499
  21,778
  23,110
  24,497
  25,944
  27,452
  29,026
  30,668
  32,383
  34,175
  36,048
  38,006
  40,055
  42,198
  44,440
  46,789
  49,247
  51,823
  54,521
  57,349
  60,312
  63,419
Total liabilities and equity, $m
  27,428
  29,569
  31,899
  34,321
  36,838
  39,453
  42,171
  44,997
  47,935
  50,992
  54,174
  57,487
  60,939
  64,537
  68,289
  72,203
  76,289
  80,555
  85,013
  89,672
  94,543
  99,639
  104,970
  110,548
  116,390
  122,506
  128,913
  135,625
  142,659
  150,030
  157,758
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
  2,694
  2,686
  2,873
  3,070
  3,273
  3,485
  3,705
  3,934
  4,172
  4,420
  4,678
  4,946
  5,226
  5,517
  5,822
  6,139
  6,470
  6,816
  7,178
  7,555
  7,951
  8,364
  8,796
  9,249
  9,723
  10,219
  10,739
  11,283
  11,854
  12,452
  13,079
Depreciation, amort., depletion, $m
  907
  983
  1,060
  1,141
  1,224
  1,311
  1,402
  1,496
  1,593
  1,695
  1,801
  1,911
  2,025
  2,145
  2,270
  2,400
  2,536
  2,677
  2,826
  2,980
  3,142
  3,312
  3,489
  3,674
  3,869
  4,072
  4,285
  4,508
  4,742
  4,987
  5,243
Funds from operations, $m
  3,635
  3,668
  3,934
  4,210
  4,498
  4,796
  5,107
  5,430
  5,766
  6,115
  6,478
  6,857
  7,251
  7,663
  8,091
  8,539
  9,006
  9,494
  10,003
  10,536
  11,093
  11,676
  12,285
  12,923
  13,591
  14,291
  15,023
  15,791
  16,596
  17,439
  18,323
Change in working capital, $m
  -215
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  42
  43
  45
  47
  49
  52
  54
  56
  59
  62
  65
  68
  71
  74
  78
  82
  86
Cash from operations, $m
  3,850
  3,644
  3,908
  4,183
  4,470
  4,768
  5,077
  5,398
  5,733
  6,081
  6,443
  6,820
  7,213
  7,623
  8,050
  8,495
  8,961
  9,446
  9,954
  10,484
  11,039
  11,619
  12,226
  12,861
  13,526
  14,223
  14,952
  15,717
  16,518
  17,357
  18,237
Maintenance CAPEX, $m
  0
  -908
  -983
  -1,060
  -1,141
  -1,224
  -1,311
  -1,402
  -1,496
  -1,593
  -1,695
  -1,801
  -1,911
  -2,025
  -2,145
  -2,270
  -2,400
  -2,536
  -2,677
  -2,826
  -2,980
  -3,142
  -3,312
  -3,489
  -3,674
  -3,869
  -4,072
  -4,285
  -4,508
  -4,742
  -4,987
New CAPEX, $m
  -1,995
  -2,018
  -2,099
  -2,181
  -2,267
  -2,356
  -2,448
  -2,545
  -2,647
  -2,754
  -2,866
  -2,984
  -3,109
  -3,241
  -3,379
  -3,526
  -3,680
  -3,843
  -4,015
  -4,197
  -4,388
  -4,589
  -4,802
  -5,025
  -5,261
  -5,509
  -5,771
  -6,046
  -6,335
  -6,640
  -6,961
Cash from investing activities, $m
  -1,965
  -2,926
  -3,082
  -3,241
  -3,408
  -3,580
  -3,759
  -3,947
  -4,143
  -4,347
  -4,561
  -4,785
  -5,020
  -5,266
  -5,524
  -5,796
  -6,080
  -6,379
  -6,692
  -7,023
  -7,368
  -7,731
  -8,114
  -8,514
  -8,935
  -9,378
  -9,843
  -10,331
  -10,843
  -11,382
  -11,948
Free cash flow, $m
  1,885
  718
  826
  942
  1,062
  1,187
  1,317
  1,452
  1,590
  1,734
  1,882
  2,035
  2,193
  2,357
  2,525
  2,700
  2,880
  3,067
  3,261
  3,462
  3,671
  3,887
  4,113
  4,347
  4,591
  4,845
  5,110
  5,386
  5,675
  5,976
  6,290
Issuance/(repayment) of debt, $m
  511
  1,369
  1,393
  1,448
  1,505
  1,564
  1,625
  1,690
  1,757
  1,828
  1,903
  1,981
  2,064
  2,151
  2,244
  2,341
  2,443
  2,552
  2,666
  2,786
  2,913
  3,047
  3,188
  3,336
  3,493
  3,658
  3,831
  4,014
  4,206
  4,408
  4,621
Issuance/(repurchase) of shares, $m
  -1,485
  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  
  -1,021
  1,369
  1,393
  1,448
  1,505
  1,564
  1,625
  1,690
  1,757
  1,828
  1,903
  1,981
  2,064
  2,151
  2,244
  2,341
  2,443
  2,552
  2,666
  2,786
  2,913
  3,047
  3,188
  3,336
  3,493
  3,658
  3,831
  4,014
  4,206
  4,408
  4,621
Total cash flow (excl. dividends), $m
  875
  2,087
  2,220
  2,390
  2,567
  2,751
  2,943
  3,141
  3,348
  3,562
  3,785
  4,017
  4,257
  4,508
  4,769
  5,041
  5,324
  5,619
  5,927
  6,248
  6,584
  6,934
  7,300
  7,683
  8,084
  8,503
  8,941
  9,400
  9,881
  10,384
  10,911
Retained Cash Flow (-), $m
  80
  -902
  -937
  -974
  -1,012
  -1,051
  -1,093
  -1,136
  -1,181
  -1,229
  -1,279
  -1,332
  -1,388
  -1,446
  -1,508
  -1,574
  -1,643
  -1,715
  -1,792
  -1,873
  -1,958
  -2,048
  -2,143
  -2,243
  -2,348
  -2,459
  -2,576
  -2,698
  -2,828
  -2,963
  -3,107
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
 
  1,185
  1,283
  1,416
  1,556
  1,700
  1,850
  2,005
  2,166
  2,333
  2,506
  2,685
  2,870
  3,062
  3,261
  3,467
  3,681
  3,904
  4,135
  4,375
  4,625
  4,886
  5,157
  5,440
  5,736
  6,044
  6,366
  6,702
  7,053
  7,420
  7,805
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
 
  1,124
  1,149
  1,191
  1,220
  1,237
  1,240
  1,230
  1,206
  1,169
  1,121
  1,062
  994
  919
  839
  756
  671
  587
  506
  429
  358
  294
  236
  186
  144
  109
  81
  58
  41
  28
  19
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 (CNI)

Valuation Ratios
P/E Ratio 22.5
Price to Sales 6.8
Price to Book 5.5
Price to Tangible Book
Price to Cash Flow 15.7
Price to Free Cash Flow 32.7
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%

CNI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CNI stock intrinsic value calculation we used $8909 million for the last fiscal year's total revenue generated by Canadian National Railway. The default revenue input number comes from 2016 income statement of Canadian National Railway. 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 CNI 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 CNI is calculated based on our internal credit rating of Canadian National Railway, 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.
    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 CNI 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 CNI 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.

Corporate tax rate of 27% is the nominal tax rate for Canadian National Railway. 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 CNI 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 CNI 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 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 CNI 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 - $10985 million for Canadian National Railway - 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 745.288 million for Canadian National Railway 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 at the current share price and the inputted number of shares is $59.3 billion.

RELATED COMPANIES Price Int.Val. Rating
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KSU Kansas City So 105.80 9.57  str.sell
NSC Norfolk Southe 118.63 30.06  str.sell

COMPANY NEWS

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▶ US Freight Rail Traffic Was a Mixed Bag in Week 30   [Aug-07-17 04:38PM  Market Realist]
▶ CN announces C$500-million debt offering   [Jul-27-17 06:00PM  PR Newswire]
▶ PRESS DIGEST- Canada-July 26   [06:49AM  Reuters]
▶ CN meets 2Q profit forecasts   [Jul-25-17 09:55PM  Associated Press]
▶ CN declares third-quarter 2017 dividend   [04:02PM  PR Newswire]
▶ Top Ranked Momentum Stocks to Buy for July 19th   [Jul-19-17 09:52AM  Zacks]
▶ Inside Kansas City Southerns Trailer Decline Last Week   [Jul-17-17 10:42AM  Market Realist]
▶ Canadian delegation: 'We're taking NAFTA discussions very seriously'   [Jul-07-17 05:10PM  American City Business Journals]
▶ Diving into Kansas City Southerns Week 25 Intermodal Data   [Jul-06-17 09:07AM  Market Realist]
▶ Inside Canadian National Railways Week 25 Intermodal Volumes   [Jul-04-17 04:06PM  Market Realist]
▶ PRESS DIGEST- Canada - July 4   [09:04AM  Reuters]
▶ Hate Risk? You'll Love These 3 Stocks   [09:33AM  Motley Fool]
▶ How Canadian National Railway Stacks Up in Valuations   [Jun-23-17 09:06AM  Market Realist]
▶ How Analysts View Canadian National Railway   [07:36AM  Market Realist]
▶ Canadian National Railway: Does It Have a Strong Intermodal?   [Jun-21-17 05:35PM  Market Realist]
▶ CN's Promising Prospects but Rich Price   [Jun-19-17 07:00AM  Morningstar]
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Stock chart of CNI Financial statements of CNI
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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