Value
5.9/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 4.3 |
| P/S | 6.7 |
| EV/EBITDA | 4.1 |
| Fwd P/E | 5.9 |
| PEG | 9.7 |
| Analyst target | 4.0 |
- ▸Forward P/E: 21.8x
- ▸PEG: 0.56
CP · Why this verdict
Why Canadian Pacific Kansas City Li (CP) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score6.1/10
ConfidenceMEDIUM
MacroNEUTRAL
TrendMatrix Research · core thesis
Engine thesis — one sentence
Canadian Pacific Kansas City's 27% operating margins and strong balance sheet reflect an industrial franchise of real quality, but the stock is trading just 0.5% below its technical target with a risk/reward ratio of 0.1-to-1, three straight earnings misses, and deteriorating price internals — a combination that makes holding more defensible than adding.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
The railroad generates operating margins of 27% and a Piotroski financial-health score of 7 out of 9 — a margin profile consistent with a durable infrastructure franchise that retains pricing power across the economic cycle. Quality breakdown | Operating margin holds above 25% over the next four quarters even as revenue recovery remains slow, confirming that the current -2% revenue decline is not triggering meaningful margin compression. | →Stable |
| CounterFree cash flow is converting at only 47% of net income — a flag that earnings quality may be lower than the headline margins suggest; combined with declining revenue, the strong operating margins may be masking deteriorating underlying cash generation. | ||
Three straight quarters of earnings misses, averaging roughly 1.4% below consensus, suggest the company is navigating a persistent headwind to estimates — a quiet pattern that tends to suppress analyst confidence and delay positive re-rating even when the absolute figures remain solid. Earnings | If the operational picture improves, EPS surprise turns positive above 0% for at least 2 of the next 3 reported quarters, confirming the miss streak has reversed. | →Stable |
| CounterThe misses have been narrow and consistent from an in-line quarter through three small misses; with the stock trading near a 52-week high and above its 200-day moving average, the market appears to be looking through near-term shortfalls and focusing on long-term franchise value. | ||
With only 0.5% upside to the technical resistance target and a risk/reward ratio of 0.1-to-1, the current price geometry does not justify initiating or adding to a position — the potential reward is a fraction of the realistic downside. Price targets | A more constructive setup would emerge if the stock pulls back and the upside-to-target expands beyond 10%, restoring a risk/reward ratio above 1.5-to-1. | →Stable |
| CounterStocks trading near 52-week highs and within reach of technical targets can continue higher as price discovery lifts resistance; if analysts raise their targets in response to improving sentiment, the current geometry may resolve upward rather than through a pullback. | ||
Despite trading above the 200-day moving average and near a 52-week high, on-balance volume is in distribution and MACD has deteriorated — a divergence between price and internals that often signals the rally is narrowing and near-term upside is limited. Momentum breakdown | Momentum recovers when MACD turns positive and OBV shifts back to accumulation over the next two quarters, validating that the price strength is supported by broad participation. | ↑Improving |
| CounterVolume distribution near a 52-week high can reflect institutional rebalancing rather than structural selling; the above-200-day-MA position and mid-range RSI suggest the broader trend remains intact despite the OBV divergence. | ||
The railroad generates operating margins of 27% and a Piotroski financial-health score of 7 out of 9 — a margin profile consistent with a durable infrastructure franchise that retains pricing power across the economic cycle.
→StableQuality breakdown
- Expectation
- Operating margin holds above 25% over the next four quarters even as revenue recovery remains slow, confirming that the current -2% revenue decline is not triggering meaningful margin compression.
CounterFree cash flow is converting at only 47% of net income — a flag that earnings quality may be lower than the headline margins suggest; combined with declining revenue, the strong operating margins may be masking deteriorating underlying cash generation.
Three straight quarters of earnings misses, averaging roughly 1.4% below consensus, suggest the company is navigating a persistent headwind to estimates — a quiet pattern that tends to suppress analyst confidence and delay positive re-rating even when the absolute figures remain solid.
→StableEarnings
- Expectation
- If the operational picture improves, EPS surprise turns positive above 0% for at least 2 of the next 3 reported quarters, confirming the miss streak has reversed.
CounterThe misses have been narrow and consistent from an in-line quarter through three small misses; with the stock trading near a 52-week high and above its 200-day moving average, the market appears to be looking through near-term shortfalls and focusing on long-term franchise value.
With only 0.5% upside to the technical resistance target and a risk/reward ratio of 0.1-to-1, the current price geometry does not justify initiating or adding to a position — the potential reward is a fraction of the realistic downside.
→StablePrice targets
- Expectation
- A more constructive setup would emerge if the stock pulls back and the upside-to-target expands beyond 10%, restoring a risk/reward ratio above 1.5-to-1.
CounterStocks trading near 52-week highs and within reach of technical targets can continue higher as price discovery lifts resistance; if analysts raise their targets in response to improving sentiment, the current geometry may resolve upward rather than through a pullback.
Despite trading above the 200-day moving average and near a 52-week high, on-balance volume is in distribution and MACD has deteriorated — a divergence between price and internals that often signals the rally is narrowing and near-term upside is limited.
↑ImprovingMomentum breakdown
- Expectation
- Momentum recovers when MACD turns positive and OBV shifts back to accumulation over the next two quarters, validating that the price strength is supported by broad participation.
CounterVolume distribution near a 52-week high can reflect institutional rebalancing rather than structural selling; the above-200-day-MA position and mid-range RSI suggest the broader trend remains intact despite the OBV divergence.
Per-dimension breakdown
Quality
6.1/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 2.7 |
| ROA | 3.0 |
| Gross margin | 6.7 |
| Op margin | 10.0 |
| Net margin | 10.0 |
| Current ratio | 2.4 |
| FCF quality | 4.4 |
| Moat | 7.1 |
| Piotroski F | 8.9 |
- ▸Strong margins: 25%
- ▸Earnings quality warning: 56% FCF/NI
- ▸Strong Piotroski F-Score: 8/9
Growth
7.7/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 5.6 |
| EPS growth | 9.8 |
Momentum
7.5/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.5 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 9.0 |
| Volume | 3.1 |
- ▸Volume accumulation (rising OBV)
- ▸Above 200-day MA
Sentiment
6.1/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 7.2 |
| Price target | 6.2 |
| erm sentiment | 4.4 |
Insider
5.0/10data confidence 50%Peer rank
5.7/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 2.8 |
| quality rank | 4.4 |
| growth rank | 7.8 |
Technical
4.2/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 1.1 |
| support resistance | 1.6 |
| 52w position | 9.8 |
Risk (lower is worse)
6.4/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 9.0 |
| days to cover | 3.1 |
| volatility | 7.1 |
| put call | 7.6 |
| implied vol | 5.8 |
| max pain risk | 5.0 |
| beta | 6.1 |
| debt equity | 7.8 |
Catalyst
3.8/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 0.0 |
| earnings timing | 5.0 |
| surprise avg | 2.2 |
| dividend safety | 6.8 |
- ▸Earnings concerns: 1B/3M
How the verdict was assembled
Engine trigger
Maintain position. Not compelling to add more. | News modifier -1 (HOLD_IF_HOLDING → SELL_IF_HOLDING).
Engine technical detail
verdict_path:
L4:PATH_F_HOLD|L3:NEWS_MOD=-1Passed (7)
- MOMENTUM:7.5>=5.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:73d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-0.9=NEGATIVE
Warning (0)
none
Reward-to-Risk
-0.90
Upside
-6.0%
Downside
6.7%
Sizing output
AVOID
SetupBreakout — Golden cross, above all MAs, RSI 57, MACD bullish
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
None of the engine's positive-conviction paths (C-quality, D-momentum) triggered — the F-path HOLD reflects balanced signals. Strongest-cleared gate: MOMENTUM:7.5>=5.5. Top dim: Growth at 7.7; weakest: Catalyst at 3.8. No conviction either direction.
The strongest dimensions are Growth at 7.7, Momentum at 7.5, and Risk (lower is worse) at 6.4; the weakest are Catalyst at 3.8, Technical at 4.2, and Insider at 5.0. The V9 engine flagged 1 failed gate, producing an asymmetric reward-to-risk of -0.90 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Strong Margin Industrial Franchise
Trip ifOperating margin compresses below 22% for 2 consecutive quarters, indicating the strong-margin franchise is under structural pressure.
- P2Three Consecutive Earnings Misses
Trip ifEPS surprise exceeds 0% for 2 consecutive quarters, indicating the miss streak has reversed.
- P3Unfavorable Risk Reward Near Target
Trip ifUpside to technical target expands beyond 10% through a pullback or analyst target revision, restoring risk/reward above 1.5-to-1.
- P4Momentum Internals Weaken At Highs
Trip ifPrice breaks above the 52-week high with OBV rising and MACD positive for 3 consecutive weeks, falsifying the distribution-at-highs thesis.