Canadian Pacific Kansas City (CP): A Bull Case Theory

We came across a bullish thesis on Canadian Pacific Kansas City on Disruptive analytics’s Substack by Magnus Ofstad. As of 9ʰ July, Canadian Pacific Kansas City’s share was trading at $81.39. CP’s trailing and forward P/E were 27.04 and 22.61 respectively according to Yahoo Finance.

The market volatility may provide an attractive entry point for investors, and Canadian Pacific Kansas City, a company with a vast rail network spanning from Northwestern Canada to Mexico, is worth considering. The company transports large bulk items such as coal, grain, and automotives, which are essential regardless of the AI revolution and tariffs. Despite the acquisition of Kansas City Southern, the company’s operating margin has improved, and investors should note that this is a capital-intensive business requiring constant maintenance and capacity expansion projects.

The company’s growth plan features significant investments in new sidings, double tracking, and terminal upgrades to support increased traffic and operational efficiency. When considering these factors and putting projected numbers into a DCF model, the company appears fairly valued. However, Canadian Pacific Kansas City can still be a good investment based on its enduring business model and wide moat characteristics. The company may not be a very sexy investment, but it can provide stable returns over time.

The company’s stock price has been relatively resilient despite tariff issues, and it has the potential to provide stable returns due to its essential business model. While it may not offer high growth rates, Canadian Pacific Kansas City’s steady performance and wide moat characteristics make it a reliable investment opportunity.

While this is our first coverage on Canadian Pacific Kansas City, we’ve recently examined another bullish thesis on a stock in the same Railroads that sheds light on similar long-term dynamics. In contrast to Union Pacific, Canadian Pacific Kansas City’s business model appears more focused on essential goods transportation, with a vast rail network spanning from Northwestern Canada to Mexico, moving bulk items such as coal, grain, CP’s growth strategy centers on investing in its rail network, with significant outlays for new sidings, double tracking, and terminal upgrades to support increased traffic and operational efficiency. While both companies operate in the same industry, their strategic focuses diverge; CP prioritizes steady performance and wide moat characteristics.

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to Blackrock.

Disclosure: None.