Canadian National Railway Company updated December 29, 2016

CN Rail is updated and rated (lower) Sell (meaning somewhere between a Hold and an outright Sell rating) at $92.01. CN is a great company with excellent economics and strong management. But it is selling at 20.3 times trailing earnings per share and earnings growth seems likely to be quite a bit lower than the historic level. Earnings had grown faster than revenues for quite a few years due to efficiency gains and I don’t think that can be sustained. In addition, revenues have historically grown faster than the economy for quite a few years despite the number of route miles being little changed and it seems unlikely that this can continue. Over the years the earnings will continue to grow but at this time the stock seems somewhat over-priced.

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