Intrinsic value of Canadian National Railway - CNI

Previous Close

$80.79

  Intrinsic Value

$27.61

stock screener

  Rating & Target

str. sell

-66%

Previous close

$80.79

 
Intrinsic value

$27.61

 
Up/down potential

-66%

 
Rating

str. sell

*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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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
  6.90
  6.71
  6.54
  6.39
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.43
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
Revenue, $m
  8,909
  9,524
  10,163
  10,827
  11,519
  12,238
  12,987
  13,768
  14,581
  15,430
  16,315
  17,239
  18,203
  19,211
  20,265
  21,366
  22,518
  23,723
  24,984
  26,305
  27,687
  29,136
  30,653
  32,243
  33,910
  35,656
  37,488
  39,408
  41,422
  43,534
  45,750
Variable operating expenses, $m
 
  5,543
  5,915
  6,301
  6,704
  7,123
  7,559
  8,013
  8,486
  8,980
  9,495
  10,033
  10,594
  11,181
  11,794
  12,435
  13,105
  13,807
  14,541
  15,309
  16,114
  16,957
  17,840
  18,765
  19,735
  20,752
  21,818
  22,936
  24,108
  25,337
  26,627
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
  5,543
  5,915
  6,301
  6,704
  7,123
  7,559
  8,013
  8,486
  8,980
  9,495
  10,033
  10,594
  11,181
  11,794
  12,435
  13,105
  13,807
  14,541
  15,309
  16,114
  16,957
  17,840
  18,765
  19,735
  20,752
  21,818
  22,936
  24,108
  25,337
  26,627
Operating income, $m
  3,932
  3,981
  4,248
  4,526
  4,815
  5,116
  5,429
  5,755
  6,095
  6,450
  6,820
  7,206
  7,609
  8,030
  8,471
  8,931
  9,412
  9,916
  10,443
  10,995
  11,573
  12,179
  12,813
  13,478
  14,174
  14,904
  15,670
  16,473
  17,314
  18,197
  19,124
EBITDA, $m
  4,839
  4,952
  5,284
  5,630
  5,989
  6,363
  6,753
  7,159
  7,582
  8,023
  8,483
  8,963
  9,465
  9,989
  10,537
  11,109
  11,708
  12,335
  12,991
  13,677
  14,396
  15,149
  15,938
  16,765
  17,631
  18,540
  19,492
  20,491
  21,538
  22,636
  23,788
Interest expense (income), $m
  348
  350
  401
  453
  507
  562
  620
  681
  744
  810
  878
  949
  1,024
  1,102
  1,183
  1,268
  1,357
  1,450
  1,547
  1,649
  1,756
  1,867
  1,984
  2,107
  2,235
  2,370
  2,511
  2,658
  2,813
  2,976
  3,146
Earnings before tax, $m
  3,647
  3,630
  3,847
  4,073
  4,308
  4,553
  4,808
  5,074
  5,351
  5,640
  5,942
  6,256
  6,585
  6,928
  7,287
  7,663
  8,055
  8,466
  8,896
  9,346
  9,818
  10,311
  10,829
  11,371
  11,939
  12,535
  13,159
  13,814
  14,501
  15,221
  15,977
Tax expense, $m
  953
  980
  1,039
  1,100
  1,163
  1,229
  1,298
  1,370
  1,445
  1,523
  1,604
  1,689
  1,778
  1,871
  1,968
  2,069
  2,175
  2,286
  2,402
  2,523
  2,651
  2,784
  2,924
  3,070
  3,224
  3,384
  3,553
  3,730
  3,915
  4,110
  4,314
Net income, $m
  2,694
  2,650
  2,808
  2,973
  3,145
  3,324
  3,510
  3,704
  3,906
  4,117
  4,337
  4,567
  4,807
  5,058
  5,320
  5,594
  5,880
  6,180
  6,494
  6,823
  7,167
  7,527
  7,905
  8,301
  8,716
  9,150
  9,606
  10,084
  10,586
  11,112
  11,663

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
  29,214
  31,174
  33,213
  35,333
  37,540
  39,839
  42,233
  44,728
  47,330
  50,045
  52,879
  55,838
  58,930
  62,161
  65,539
  69,073
  72,769
  76,639
  80,689
  84,931
  89,373
  94,028
  98,905
  104,017
  109,375
  114,993
  120,884
  127,062
  133,541
  140,338
Adjusted assets (=assets-cash), $m
  27,298
  29,214
  31,174
  33,213
  35,333
  37,540
  39,839
  42,233
  44,728
  47,330
  50,045
  52,879
  55,838
  58,930
  62,161
  65,539
  69,073
  72,769
  76,639
  80,689
  84,931
  89,373
  94,028
  98,905
  104,017
  109,375
  114,993
  120,884
  127,062
  133,541
  140,338
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
  26,314
  28,080
  29,916
  31,826
  33,814
  35,884
  38,041
  40,288
  42,632
  45,078
  47,630
  50,296
  53,080
  55,991
  59,034
  62,216
  65,546
  69,031
  72,680
  76,500
  80,502
  84,694
  89,088
  93,692
  98,519
  103,579
  108,885
  114,450
  120,286
  126,408
Working capital, $m
  -667
  324
  346
  368
  392
  416
  442
  468
  496
  525
  555
  586
  619
  653
  689
  726
  766
  807
  849
  894
  941
  991
  1,042
  1,096
  1,153
  1,212
  1,275
  1,340
  1,408
  1,480
  1,556
Total debt, $m
  8,095
  9,122
  10,294
  11,513
  12,781
  14,101
  15,475
  16,907
  18,399
  19,956
  21,579
  23,274
  25,043
  26,892
  28,824
  30,845
  32,957
  35,168
  37,482
  39,904
  42,440
  45,097
  47,881
  50,797
  53,854
  57,058
  60,418
  63,941
  67,635
  71,510
  75,574
Total liabilities, $m
  16,443
  17,470
  18,642
  19,861
  21,129
  22,449
  23,823
  25,255
  26,747
  28,304
  29,927
  31,622
  33,391
  35,240
  37,172
  39,193
  41,305
  43,516
  45,830
  48,252
  50,788
  53,445
  56,229
  59,145
  62,202
  65,406
  68,766
  72,289
  75,983
  79,858
  83,922
Total equity, $m
  10,985
  11,744
  12,532
  13,351
  14,204
  15,091
  16,015
  16,978
  17,981
  19,027
  20,118
  21,257
  22,447
  23,690
  24,989
  26,347
  27,767
  29,253
  30,809
  32,437
  34,142
  35,928
  37,799
  39,760
  41,815
  43,969
  46,227
  48,595
  51,079
  53,684
  56,416
Total liabilities and equity, $m
  27,428
  29,214
  31,174
  33,212
  35,333
  37,540
  39,838
  42,233
  44,728
  47,331
  50,045
  52,879
  55,838
  58,930
  62,161
  65,540
  69,072
  72,769
  76,639
  80,689
  84,930
  89,373
  94,028
  98,905
  104,017
  109,375
  114,993
  120,884
  127,062
  133,542
  140,338
Debt-to-equity ratio
  0.737
  0.780
  0.820
  0.860
  0.900
  0.930
  0.970
  1.000
  1.020
  1.050
  1.070
  1.090
  1.120
  1.140
  1.150
  1.170
  1.190
  1.200
  1.220
  1.230
  1.240
  1.260
  1.270
  1.280
  1.290
  1.300
  1.310
  1.320
  1.320
  1.330
  1.340
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
  2,650
  2,808
  2,973
  3,145
  3,324
  3,510
  3,704
  3,906
  4,117
  4,337
  4,567
  4,807
  5,058
  5,320
  5,594
  5,880
  6,180
  6,494
  6,823
  7,167
  7,527
  7,905
  8,301
  8,716
  9,150
  9,606
  10,084
  10,586
  11,112
  11,663
Depreciation, amort., depletion, $m
  907
  971
  1,036
  1,104
  1,174
  1,248
  1,324
  1,404
  1,487
  1,573
  1,663
  1,758
  1,856
  1,959
  2,066
  2,178
  2,296
  2,419
  2,547
  2,682
  2,823
  2,971
  3,125
  3,287
  3,457
  3,635
  3,822
  4,018
  4,223
  4,439
  4,664
Funds from operations, $m
  3,635
  3,621
  3,844
  4,077
  4,319
  4,572
  4,834
  5,108
  5,393
  5,690
  6,001
  6,325
  6,663
  7,016
  7,386
  7,772
  8,176
  8,599
  9,041
  9,505
  9,990
  10,498
  11,030
  11,588
  12,173
  12,786
  13,428
  14,102
  14,809
  15,550
  16,328
Change in working capital, $m
  -215
  21
  22
  23
  24
  24
  25
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
  59
  62
  65
  68
  72
  75
Cash from operations, $m
  3,850
  3,600
  3,822
  4,055
  4,296
  4,547
  4,809
  5,081
  5,365
  5,662
  5,971
  6,293
  6,630
  6,982
  7,350
  7,735
  8,137
  8,558
  8,998
  9,460
  9,943
  10,449
  10,979
  11,534
  12,116
  12,726
  13,366
  14,037
  14,741
  15,478
  16,252
Maintenance CAPEX, $m
  0
  -908
  -971
  -1,036
  -1,104
  -1,174
  -1,248
  -1,324
  -1,404
  -1,487
  -1,573
  -1,663
  -1,758
  -1,856
  -1,959
  -2,066
  -2,178
  -2,296
  -2,419
  -2,547
  -2,682
  -2,823
  -2,971
  -3,125
  -3,287
  -3,457
  -3,635
  -3,822
  -4,018
  -4,223
  -4,439
New CAPEX, $m
  -1,995
  -1,698
  -1,766
  -1,836
  -1,910
  -1,988
  -2,070
  -2,157
  -2,248
  -2,344
  -2,445
  -2,553
  -2,666
  -2,785
  -2,910
  -3,043
  -3,183
  -3,330
  -3,485
  -3,648
  -3,821
  -4,002
  -4,192
  -4,393
  -4,604
  -4,827
  -5,060
  -5,306
  -5,565
  -5,836
  -6,122
Cash from investing activities, $m
  -1,965
  -2,606
  -2,737
  -2,872
  -3,014
  -3,162
  -3,318
  -3,481
  -3,652
  -3,831
  -4,018
  -4,216
  -4,424
  -4,641
  -4,869
  -5,109
  -5,361
  -5,626
  -5,904
  -6,195
  -6,503
  -6,825
  -7,163
  -7,518
  -7,891
  -8,284
  -8,695
  -9,128
  -9,583
  -10,059
  -10,561
Free cash flow, $m
  1,885
  994
  1,086
  1,182
  1,282
  1,385
  1,491
  1,601
  1,714
  1,831
  1,952
  2,077
  2,207
  2,342
  2,481
  2,626
  2,776
  2,932
  3,095
  3,264
  3,440
  3,624
  3,816
  4,016
  4,224
  4,443
  4,670
  4,909
  5,158
  5,419
  5,692
Issuance/(repayment) of debt, $m
  511
  1,157
  1,172
  1,219
  1,268
  1,320
  1,374
  1,432
  1,492
  1,556
  1,624
  1,695
  1,770
  1,849
  1,932
  2,020
  2,113
  2,211
  2,314
  2,422
  2,536
  2,657
  2,783
  2,917
  3,057
  3,204
  3,360
  3,523
  3,694
  3,875
  4,064
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
  1,157
  1,172
  1,219
  1,268
  1,320
  1,374
  1,432
  1,492
  1,556
  1,624
  1,695
  1,770
  1,849
  1,932
  2,020
  2,113
  2,211
  2,314
  2,422
  2,536
  2,657
  2,783
  2,917
  3,057
  3,204
  3,360
  3,523
  3,694
  3,875
  4,064
Total cash flow (excl. dividends), $m
  875
  2,151
  2,258
  2,401
  2,550
  2,705
  2,865
  3,032
  3,206
  3,387
  3,576
  3,772
  3,977
  4,190
  4,413
  4,646
  4,889
  5,143
  5,408
  5,686
  5,977
  6,281
  6,599
  6,932
  7,281
  7,647
  8,030
  8,432
  8,852
  9,294
  9,756
Retained Cash Flow (-), $m
  80
  -759
  -788
  -819
  -853
  -887
  -924
  -962
  -1,003
  -1,046
  -1,091
  -1,139
  -1,190
  -1,243
  -1,299
  -1,358
  -1,420
  -1,486
  -1,555
  -1,628
  -1,705
  -1,786
  -1,871
  -1,961
  -2,055
  -2,154
  -2,258
  -2,368
  -2,483
  -2,605
  -2,732
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
 
  1,392
  1,470
  1,582
  1,697
  1,817
  1,941
  2,070
  2,203
  2,341
  2,484
  2,633
  2,787
  2,947
  3,114
  3,288
  3,469
  3,657
  3,853
  4,058
  4,272
  4,495
  4,728
  4,972
  5,226
  5,493
  5,772
  6,063
  6,369
  6,689
  7,024
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
 
  1,321
  1,317
  1,330
  1,332
  1,322
  1,301
  1,269
  1,226
  1,173
  1,111
  1,042
  966
  885
  801
  716
  632
  550
  472
  398
  331
  270
  217
  170
  131
  99
  73
  53
  37
  26
  17
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 is engaged in the rail and related transportation business. The Company's network of approximately 20,000 route miles of track spans Canada and mid-America, connecting approximately three coasts, including the Atlantic, the Pacific and the Gulf of Mexico and serving the cities and ports of Vancouver, Prince Rupert (British Columbia), Montreal, Halifax, New Orleans, and Mobile (Alabama), and the metropolitan areas of Toronto, Edmonton, Winnipeg, Calgary, Chicago, Memphis, Detroit, Duluth (Minnesota)/Superior (Wisconsin), and Jackson (Mississippi), with connections to all points in North America. Its network and connections to all Class I railroads provide its customers access to the three North American Free Trade Agreement nations. It carries over 300 million tons of cargo, serving exporters, importers, retailers, farmers and manufacturers. Its freight includes seven commodity representing a portfolio of goods.

FINANCIAL RATIOS  of  Canadian National Railway (CNI)

Valuation Ratios
P/E Ratio 22.9
Price to Sales 6.9
Price to Book 5.6
Price to Tangible Book
Price to Cash Flow 16
Price to Free Cash Flow 33.2
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 67.9%
Gross Margin - 3 Yr. Avg. 65.9%
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 6.9% 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 746.667 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 $60.3 billion.

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COMPANY NEWS

▶ Canadian National Railway: Carload Traffic in Week 1   [Jan-17-18 07:32AM  Market Realist]
▶ Canadian Pacifics Railcar Traffic: Closed Positive in Week 1   [Jan-16-18 03:35PM  Market Realist]
▶ Top 4 Railroad Stocks for 2018   [Jan-02-18 06:00AM  Investopedia]
▶ 3 Growth Stocks With Virtual Monopolies   [Dec-05-17 09:03PM  Motley Fool]
▶ How US Railroads Operating Margin Growth Looked in 3Q17   [Dec-01-17 10:32AM  Market Realist]
▶ This US Railroad Led in 3Q17 Coal Revenue Growth   [Nov-30-17 10:33AM  Market Realist]
▶ Carloads Fall, US Rail Freight Traffic Stalls in Week 46   [Nov-28-17 11:06AM  Market Realist]
▶ US Rail Freight Traffic Marginally Recovered in Week 45   [Nov-21-17 01:21PM  Market Realist]
▶ Inside Canadian National Railways Freight Volumes in Week 44   [Nov-16-17 09:02AM  Market Realist]
▶ Top 3 Railroad Stocks for 2017   [Nov-03-17 12:58PM  Investopedia]
Financial statements of CNI
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