Union Pacific Corp (UNP, Financial) experienced a daily gain of 3.81% and a 3-month gain of 0.95%. With an Earnings Per Share (EPS) (EPS) of 10.96, the stock appears modestly undervalued. This article aims to delve into the intrinsic value of Union Pacific (UNP) to answer this question and provide a comprehensive valuation analysis.
Company Introduction
Based in Omaha, Nebraska, Union Pacific is the largest public railroad in North America. It operates on more than 30,000 miles of track in the western two-thirds of the U.S., generating a revenue of $25 billion in 2022 by hauling a variety of goods. The company's stock price is currently $213.77, while the GF Value, an estimation of the fair value, stands at $273.14. This discrepancy suggests that Union Pacific's stock may be modestly undervalued.
Understanding the GF Value
The GF Value is a proprietary measure that determines the intrinsic value of a stock. It takes into account historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides a visual representation of the stock's fair trading value.
According to the GF Value, Union Pacific's stock is modestly undervalued. This is based on historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. The stock's current price of $213.77 per share suggests that it is trading below its estimated fair value. As a result, the long-term return of Union Pacific's stock is likely to be higher than its business growth.
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Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Union Pacific has a cash-to-debt ratio of 0.02, ranking worse than 97.14% of 944 companies in the Transportation industry. Based on this, GuruFocus ranks Union Pacific's financial strength as 4 out of 10, suggesting a poor balance sheet.
Profitability and Growth
Union Pacific has been profitable 10 years over the past decade. With a revenue of $24.80 billion and an EPS of $10.96 in the past twelve months, the company's operating margin is 38.53%, ranking better than 93.29% of 954 companies in the Transportation industry. Union Pacific's profitability is ranked 9 out of 10, indicating strong profitability.
Union Pacific's average annual revenue growth is 9%, ranking better than 59.28% of 916 companies in the Transportation industry. The 3-year average EBITDA growth is 9%, which ranks better than 51.46% of 822 companies in the Transportation industry.
ROIC vs WACC
Union Pacific's return on invested capital (ROIC) is 11.38, while its weighted average cost of capital (WACC) is 9.67. This suggests that the company generates a higher return on its invested capital than the cost of that capital.
Conclusion
In summary, Union Pacific's stock appears to be modestly undervalued. While the company's financial condition is poor, its profitability is strong, and its growth ranks better than 51.46% of 822 companies in the Transportation industry. For more information about Union Pacific's stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
