Q: I am looking to add either CP or CNR to my portfolio. Would you please provide your views on these two companies and advice which you would prefer at this time and why.
thanks
Paula
thanks
Paula
5i Research Answer:
Both companies have provided investors with stable and consistent above-market returns over the years, around 12%-15% annually on average over time. We think both are currently trading at fair valuations. Although CP is trading at a premium multiple of 22.2x Forward P/E, and CNR is trading at 19.2x Forward P/E, we think the prospective returns for the two names could be in line with each other. This is mainly because CP is rewarded with a higher multiple due to its superior track record of operational efficiency and stronger organic growth, while CNR offers slightly better value in terms of its discount in valuation. We are comfortable holding both, but if we HAVE TO pick one, we would side with CP.