We think both are trading at fair valuations compared to their historical averages. CP is trading at a premium multiple of 22.9x Forward P/E, and CNR is trading at 18.7x Forward P/E. CP’s premium valuation is mainly because of CP’s superior track record of operational efficiency and stronger organic growth. We think both can work out fine; the two companies could likely provide very similar returns (potentially 12%-15% annualized) from the current levels over the next three to five years. If we HAVE TO pick between them, we would side with the industry leader, CP.
5i Research Answer: