Is CSX (CSX) Fairly Priced After Recent Freight Sector Sentiment Shift?

• If you are wondering whether CSX at around US$35.05 is still a solid entry point or if the easy gains are gone, you are in the right place to size up what the current price might be offering you.
• The stock has seen mixed returns, with a 1 year return of 10.6% but a 7 day decline of 3.3%, a 30 day decline of 3.6% and a year to date decline of 3.4%, which can change how the market views its potential and its risks.
• Recent headlines around CSX have focused on operational updates and broader freight and transportation sector sentiment, which often influence how investors think about future demand and efficiency. Together, these stories help explain why the share price has moved the way it has in the short term, while longer term returns look different.
• Right now CSX has a valuation score of 2 out of 6. This reflects how many of our checks screen it as undervalued. Next, we will walk through the standard valuation approaches that sit behind that score, before finishing with a more holistic way to think about what the stock could be worth.

CSX scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: CSX Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes estimates of a company’s future cash flows and discounts them back to today’s dollars to arrive at an intrinsic value per share.

For CSX, the model used is a 2 Stage Free Cash Flow to Equity approach, based on cash flow projections in $. The latest twelve month free cash flow sits at about $2.1b. Analysts supply explicit free cash flow estimates for the earlier years, and Simply Wall St then extends those forecasts. By 2029, projected free cash flow is $3.8b, and the model continues with extrapolated figures out to 2035.

When all those future cash flows are discounted back, the DCF output suggests an intrinsic value of about $35.79 per share, compared with the recent share price around $35.05. That implies the stock trades at roughly a 2.1% discount to the model’s estimate, which is a very small gap and well within a reasonable margin of error for this kind of analysis.

Result: ABOUT RIGHT

CSX is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for CSX.

Approach 2: CSX Price vs Earnings

For profitable companies, the P/E ratio is a useful way to relate what you pay for a stock to the earnings it is currently generating. It gives you a quick sense of how many dollars of share price you are paying for each dollar of earnings.

What counts as a “normal” P/E depends on how the market views a company’s earnings growth prospects and risk. Higher expected growth or lower perceived risk can justify a higher P/E, while slower growth or higher risk can point to a lower P/E as more reasonable.

CSX currently trades on a P/E of 22.49x. That is very close to its peer average of 22.47x and below the Transportation industry average of 32.77x. Simply Wall St’s Fair Ratio for CSX is 20.98x. This is its proprietary estimate of what the P/E might be, given factors such as earnings growth, margins, industry, market cap and risk profile.

The Fair Ratio aims to be more tailored than a simple peer or industry comparison because it adjusts for those company specific features rather than relying on broad group averages. With CSX’s actual P/E at 22.49x versus a Fair Ratio of 20.98x, the market price sits somewhat above that fair range.

Result: OVERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1446 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your CSX Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives, which are simple stories you create on Simply Wall St’s Community page that link your view of CSX’s business, its future revenue, earnings and margins, into a financial forecast and a fair value that you can compare with today’s share price. Because these Narratives update as new news or earnings land, you can see in real time how your story stacks up against others. For example, you might consider a more optimistic CSX view that lines up with a fair value of about US$44.00, or a more cautious stance closer to US$27.00, and then decide for yourself whether the current price looks attractive, expensive or about right.

Do you think there's more to the story for CSX? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com