Today we're going to take a look at the well-established Canadian National Railway Company (TSE:CNR). The company's stock received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$153 at one point, and dropping to the lows of CA$132. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Canadian National Railway's current trading price of CA$139 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Canadian National Railway’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

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What's The Opportunity In Canadian National Railway?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 6.0% below our intrinsic value, which means if you buy Canadian National Railway today, you’d be paying a fair price for it. And if you believe the company’s true value is CA$147.30, then there’s not much of an upside to gain from mispricing. Furthermore, Canadian National Railway’s low beta implies that the stock is less volatile than the wider market.

See our latest analysis for Canadian National Railway

Can we expect growth from Canadian National Railway?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 29% over the next couple of years, the future seems bright for Canadian National Railway. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? CNR’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on CNR, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. You'd be interested to know, that we found 1 warning sign for Canadian National Railway and you'll want to know about it.

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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.