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Canadian Pacific Railway Limited (TSE:CP): What's The Analyst Consensus Outlook?

Simply Wall St

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Canadian Pacific Railway Limited's (TSE:CP) most recent earnings announcement in December 2018 showed that the business faced a immense headwind with earnings falling by -19%. Below, I've laid out key growth figures on how market analysts predict Canadian Pacific Railway's earnings growth trajectory over the next couple of years and whether the future looks brighter. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.

View our latest analysis for Canadian Pacific Railway

Market analysts' consensus outlook for the upcoming year seems optimistic, with earnings rising by a robust 16%. This growth seems to continue into the following year with rates arriving at double digit 27% compared to today’s earnings, and finally hitting CA$2.6b by 2022.

TSX:CP Past and Future Earnings, April 8th 2019

Although it is useful to be aware of the growth each year relative to today’s level, it may be more valuable determining the rate at which the earnings are moving every year, on average. The advantage of this approach is that it removes the impact of near term flucuations and accounts for the overarching direction of Canadian Pacific Railway's earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I've appended a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 10%. This means that, we can anticipate Canadian Pacific Railway will grow its earnings by 10% every year for the next couple of years.

Next Steps:

For Canadian Pacific Railway, there are three relevant factors you should further research:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is CP worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether CP is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of CP? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.