The trailing P/E is elevated relative to CNI and UNP, but the forward multiple compresses sharply, suggesting the market is pricing in a recovery in earnings power as integration costs fade. EV/EBITDA of 17.55x is above the peer average of ~16.9x, yet the forward EV/EBITDA of 12.82x indicates a significant expected improvement in EBITDA. This gap implies the market is not fully discounting the merger's potential synergies, but also reflects execution risk. The PEG of 5.99 is high, indicating that the current growth rate is not sufficient to justify the multiple, unless the merger delivers substantial cost savings.

The dramatic drop in operating margin in 2026Q2 appears tied to acquisition-related costs, as SG&A surged to 26% of revenue, a level not seen in prior quarters. Excluding this distortion, the operating margin in the prior four quarters averaged around 37%, which is consistent with the peer group's 33-41% range. Net margin of 10.6% in 2026Q2 is well below the 22-33% range of the prior year, indicating that the merger is currently dilutive to profitability. Investors should monitor whether these costs are transitory or represent a permanent shift in the cost structure.

The low ROIC is a direct consequence of the massive capital deployed in the Kansas City Southern acquisition, which has not yet generated proportional returns. While ROE of 2.2% in 2026Q2 is also depressed, it is consistent with the company's historical range, indicating that the return on equity is being diluted by the increased equity base. The improvement in ROIC from 1.3% in 2024Q1 to 1.5% in 2026Q2 is marginal, suggesting that integration synergies are slow to materialize. If the company can achieve the projected cost savings, ROIC should trend upward, but the current data does not yet show a clear inflection.

The negative CCC indicates that CP is effectively using supplier financing to fund its operations, a common feature in the railroad industry due to the high proportion of payables. DPO of 133 days in 2026Q2 is significantly higher than the 81-90 days seen in early 2024, suggesting that the company is stretching its payment terms, possibly to conserve cash during the integration. Asset turnover remains low at 0.11, reflecting the capital-intensive nature of the business, but this is typical for railroads. The improvement in CCC is a positive sign, but investors should verify that the extended payables do not strain supplier relationships.

The increase in leverage is consistent with the debt-funded acquisition, and D/EBITDA of 12.98x is high relative to the 9-13x range seen in the prior year, reflecting the current EBITDA compression. However, interest coverage of 6.51x is still comfortable, and the company's cash flow generation has been sufficient to cover interest expenses. The prior cash flow analysis noted that buybacks exceeded FCF in 2026Q2, which could increase reliance on debt if sustained. Investors should monitor whether the company can deleverage through retained earnings and EBITDA growth, as the current D/EBITDA is above the typical investment-grade threshold.

The current ratio has been below 1 for the entire period, which is typical for railroads due to their low current assets relative to current liabilities. However, the quick ratio of 0.50 is particularly low, indicating that the company relies heavily on inventory and other non-cash current assets to meet short-term obligations. The negative CCC of -86 days implies that CP receives cash from customers before paying suppliers, which mitigates the need for a large cash buffer. Nevertheless, the cash balance of $366M is modest relative to the $25.1B in total debt, and any disruption in cash conversion could strain liquidity. The company's access to credit markets appears adequate, but the thin buffer warrants monitoring.