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Let's talk about the popular CSX Corporation (NASDAQ:CSX). The company's shares saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine CSX’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What is CSX worth?
According to my valuation model, CSX seems to be fairly priced at around 1.16% above my intrinsic value, which means if you buy CSX today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is $34.72, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because CSX’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will CSX generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a relatively muted profit growth of 9.4% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for CSX, at least in the short term.
What this means for you:
Are you a shareholder? It seems like the market has already priced in CSX’s future outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on CSX, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. In terms of investment risks, we've identified 2 warning signs with CSX, and understanding these should be part of your investment process.
If you are no longer interested in CSX, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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