Rating Change #6
Canadian Pacific Railway (CP) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
Highlights from the ratings report include:
- CP's debt-to-equity ratio of 0.84 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that CP's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.61 is low and demonstrates weak liquidity.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- CANADIAN PACIFIC RAILWAY LTD's earnings per share declined by 23.5% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past two years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, CANADIAN PACIFIC RAILWAY LTD increased its bottom line by earning $3.83 versus $3.66 in the prior year.
- Net operating cash flow has increased to $212.30 million or 14.81% when compared to the same quarter last year. Despite an increase in cash flow, CANADIAN PACIFIC RAILWAY LTD's cash flow growth rate is still lower than the industry average growth rate of 30.84%.
- CP's revenue growth trails the industry average of 16.0%. Since the same quarter one year prior, revenues slightly increased by 2.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
Canadian Pacific Railway Limited, through its subsidiaries, operates a transcontinental railway, and provides rail and intermodal freight transportation services. The company has a P/E ratio of 17.3, below the average transportation industry P/E ratio of 17.9 and below the S&P 500 P/E ratio of 17.7. Canadian Pacific Railway has a market cap of $10.5 billion and is part of the services sector and transportation industry. Shares are down 5.5% year to date as of the close of trading on Thursday.You can view the full Canadian Pacific Railway Ratings Report or get investment ideas from our investment research center.
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