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Canadian National Railway Company (CNI) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Canadian National Railway Company (CNI)

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Intrinsic Value (DCF)

Current$99.23
→
Intrinsic$67.83
-32%
$34.71$67.83$133.75
Market implies 16% growth for 5 years
Current price reflects execution expectations above 9% growth — not unreasonable for quality businesses.
At $99, the market prices in continued high-teens cash flow growth (16%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $35 → Bull $134. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →5%7%9%11%
8%$90$102$114$127
10%$52$60$68$76
12%$32$38$43$50
14%$19$24$28$33

Bull Case

  • Bull case ($134) offers 35% upside at 11% growth, 8% discount
  • Conservative 9% growth assumption is achievable based on track record

Bear Case

  • Bear case ($35) implies 65% downside at 7% growth, 12% discount
  • Price reflects 16% growth expectations vs 9% historical — high bar to clear
  • Trading 32% above base case — execution must exceed assumptions to justify
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5-Year Free Cash Flow Projection

Year 1$3.43B
Year 2$3.73B
Year 3$4.07B
Year 4$4.43B
Year 5$4.82B
Terminal$76.40B

📐 Model Inputs

Growth Rate8.9%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate9.5%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$3.15BTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is CNI stock undervalued or overvalued?
🔴 OVERVALUED

CNI trades at $99.23 vs. our DCF-derived intrinsic value of $67.83, implying -33% downside. Using a 9.5% WACC and 8.9% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($109.17) suggests limited upside.

What is CNI's intrinsic value?

Using a 5-year DCF model: Base FCF of $3.15B, projected at 8.9% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 9.5% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $20.98B net debt and dividing by 0.63B shares: Bear $38.18 | Base $67.83 | Bull $109.17. Current price $99.23 implies -33% to base case.

How is CNI's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 8.9% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=9.5%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($64.02B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 20.3x.