CSX Corporation (CSX) Could Become One of Warren Buffett’s Favorites (Part 6)

Peer comparison

CSX is trading around $23 per share, with a total market cap of around $23.5 billion. The market is valuing CSX at nearly 7.1 times EV/EBITDA. Compared to its peers including Norfolk Southern Corp. (NYSE:NSC) and Union Pacific Corporation (NYSE:UNP), CSX has the cheapest valuation. Norfolk Southern, with a trading price of nearly $75 per share, is worth around $23.5 billion on the market. The market values the company at 7.84 times EV/EBITDA. Union Pacific is the biggest company among the three, with a total market cap of more than $65 billion. At $138 per share, Union Pacific is valued the most expensive, at nearly 8.6 times EV/EBITDA.

Union Pacific seems to deserve a higher valuation than the other two, thanks to its higher profitability. Its operating margin is the highest at 32% while the operating margins of CSX Corporation (NYSE:CSX) and Norfolk Southern are 29% and 28%, respectively. Among the three, Norfolk Southern pays the highest dividend yield at 2.6% while Union Pacific pays the lowest yield at 1.9%.

Foolish bottom line

With a high operating margin, improving operating performance, consistent cash flow and dividends, and reasonable valuation, CSX could be considered a good long-term stock to hold for income investors.

The article This Company Could Become One of Warren Buffett’s Favorites (Part 6) originally appeared on Fool.com and is written by  Anh HOANG.

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