March 28, 2024 9:54 AM

Is the Canadian National Railway worth buying? It is!

The Canadian National Railway continues to weather problems in the economy which makes it a must for investors.

/ Published 5 years ago

Share on facebook
Share on twitter
Share on email
Share on linkedin
Share on whatsapp

Despite its importance and impact on Canadian commuters, the Canadian National Railway (TSX:CNR) remains to be an underappreciated company in North America. Investors often overlook the company’s stock to focus on other industries such as cannabis, healthcare, and even food and drinks. Upon further analysis, however, the Canadian National Railway is shaping up to be a viable long-term investment plan.

The company’s share on the Toronto Stock Exchange and the New York Stock Exchange (NYSE) is a low-risk option to add to our portfolios. It is currently trading at US$73.46 a piece on the NYSE while at the TSX, it is at $96.51. It is a relatively expensive share to own but what makes it so enticing is its steady movement towards growth.

Investing guru Warren Buffett dubs the company as a wonderful business. By this, Buffett commends the stock’s huge potential for growth and its steady stream of earnings. It will remain as a prominent transportation company in Canada so it is expected to make good revenue years from now.

The company was busier than usual this 2018. By the third quarter, it was able to finish 22 out of 27 infrastructure projects geared towards improving its services. Aside from that, the company had a 59.5 percent operating ratio which equates to a 230 basis points year-over-year growth.

The Canadian National Railway has weathered various storms like the trade war and the previous recession. Experts are claiming that it is going to stand its ground for more global economic issues to come. The key takeaway from the company’s stock is that it is consistently operating well and that it is able to stay strong regardless of market conditions.

Canadian National Railway buys back shares

Canadian National Railway
There is a lot of support to keep the Canadian National Railway afloat. (Source)

The Canadian National Railway began an accelerated buyback of roughly 5.5 million shares back in October. The amount they bought back amounts to CA$400 million. Since the announcement was made, it is expected that the buybacks will be completed in 90 days so it might be completed before this year ends.

It is going to spend a lot to buy back shares but investors should not worry about the company’s cash flow for 2019. It accrued massive capital investments back in 2018 which it will use to support itself next year. In total, the company will end up spending about $3.5 billion in capital expenditures.

Although the company is pulling back shares, investors should hold on to theirs. There is a lot of support to keep the company afloat, so they should not have any worries for now.

The stock market is volatile at the moment because of the rising tensions between major economies. While this may seem like a sign to pull out stocks for investors, they could still try expanding their portfolios with safe stocks such as Canadian National Railway. However, it is safe to say that the company’s stock is more appropriate for long-term buys.

Tags : 

Copyright © 2020 CA Stocks. All Rights Reserved.