Canadian Pacific Railway (NYSE:CP) and Canadian National Railway (NYSE:CNI) are both large-cap transportation companies, but which is the better investment? We will contrast the two businesses based on the strength of their dividends, earnings, risk, institutional ownership, profitability, analyst recommendations and valuation.
Profitability
This table compares Canadian Pacific Railway and Canadian National Railway's net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
|---|
| Canadian Pacific Railway | 29.95% | 35.29% | 11.10% |
| Canadian National Railway | 29.76% | 22.99% | 9.51% |
Volatility & Risk
Canadian Pacific Railway has a beta of 0.95, indicating that its share price is 5% less volatile than the S&P 500. Comparatively, Canadian National Railway has a beta of 0.88, indicating that its share price is 12% less volatile than the S&P 500.
Analyst Ratings
This is a summary of current ratings and price targets for Canadian Pacific Railway and Canadian National Railway, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
|---|
| Canadian Pacific Railway | 1 | 5 | 17 | 0 | 2.70 |
| Canadian National Railway | 1 | 11 | 6 | 0 | 2.28 |
Canadian Pacific Railway presently has a consensus target price of $313.00, suggesting a potential upside of 22.35%. Canadian National Railway has a consensus target price of $99.1875, suggesting a potential upside of 11.60%. Given Canadian Pacific Railway's stronger consensus rating and higher possible upside, analysts plainly believe Canadian Pacific Railway is more favorable than Canadian National Railway.
Dividends
Canadian Pacific Railway pays an annual dividend of $2.44 per share and has a dividend yield of 1.0%. Canadian National Railway pays an annual dividend of $1.64 per share and has a dividend yield of 1.8%. Canadian Pacific Railway pays out 19.7% of its earnings in the form of a dividend. Canadian National Railway pays out 37.4% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Canadian Pacific Railway has raised its dividend for 4 consecutive years and Canadian National Railway has raised its dividend for 8 consecutive years. Canadian National Railway is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Insider and Institutional Ownership
69.4% of Canadian Pacific Railway shares are owned by institutional investors. Comparatively, 55.1% of Canadian National Railway shares are owned by institutional investors. 0.0% of Canadian Pacific Railway shares are owned by company insiders. Comparatively, 2.4% of Canadian National Railway shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.
Earnings and Valuation
This table compares Canadian Pacific Railway and Canadian National Railway's top-line revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
|---|
| Canadian Pacific Railway | $5.87 billion | 5.91 | $1.84 billion | $12.39 | 20.65 |
| Canadian National Railway | $11.30 billion | 5.59 | $3.18 billion | $4.39 | 20.25 |
Canadian National Railway has higher revenue and earnings than Canadian Pacific Railway. Canadian National Railway is trading at a lower price-to-earnings ratio than Canadian Pacific Railway, indicating that it is currently the more affordable of the two stocks.
Summary
Canadian Pacific Railway beats Canadian National Railway on 12 of the 17 factors compared between the two stocks.
