CSX Corp (CSX): A Hidden Gem in the Transportation Industry?
With a daily loss of 1.34%, a 3-month loss of 8.98%, and an Earnings Per Share (EPS) (EPS) of 1.98, CSX Corp (NASDAQ:CSX) appears to be significantly undervalued. But is this truly the case? This article aims to provide a comprehensive valuation analysis of CSX (NASDAQ:CSX) to answer this question. So, let's delve deeper into the financials and performance of this company.
Introduction to CSX Corp (NASDAQ:CSX)
Operating in the Eastern United States, CSX is a Class I railroad that generated nearly $14.8 billion in revenue in 2022. With over 21,000 miles of track, CSX transports a diverse mix of cargo, including coal, chemicals, intermodal containers, and automotive cargo. Despite its current stock price of $30.21, the GF Value estimates the fair value of CSX (NASDAQ:CSX) to be $43.03, suggesting that the stock is significantly undervalued.
Understanding the GF Value of CSX Corp (NASDAQ:CSX)
The GF Value is a proprietary measure that estimates the intrinsic value of a stock. It considers historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
With a current price of $30.21 per share and a market cap of $60.60 billion, CSX (NASDAQ:CSX) is estimated to be significantly undervalued. As a result, the long-term return of its stock is likely to be much higher than its business growth.
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Assessing the Financial Strength of CSX Corp (NASDAQ:CSX)
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial to review a company's financial strength before deciding to buy shares. CSX has a cash-to-debt ratio of 0.06, ranking worse than 89.89% of 940 companies in the Transportation industry. GuruFocus ranks CSX's financial strength as 5 out of 10, suggesting a fair balance sheet.
Profitability and Growth of CSX Corp (NASDAQ:CSX)
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. CSX has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $15 billion and an EPS of $1.98. Its operating margin is 39.14%, which ranks better than 93.91% of 952 companies in the Transportation industry. Overall, the profitability of CSX is ranked 9 out of 10, indicating strong profitability.
Growth is closely correlated with the long-term performance of a company's stock. CSX's 3-year average revenue growth rate is better than 65.94% of 916 companies in the Transportation industry. CSX's 3-year average EBITDA growth rate is 10.2%, ranking better than 53.59% of 821 companies in the Transportation industry.
ROIC vs WACC Analysis of CSX Corp (NASDAQ:CSX)
Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, CSX's return on invested capital is 11.77, and its cost of capital is 10.12.
Conclusion
Overall, CSX Corp (NASDAQ:CSX) stock is estimated to be significantly undervalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 53.59% of 821 companies in the Transportation industry. To learn more about CSX stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
