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Strategies & Market Trends : Fundamental Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Sergio H who wrote (1828)	7/19/2012 8:24:41 PM
From: E_K_S	Read Replies (1) \| Respond to of 4719

CSX Corp. (NYSE: CSX) - railroad operator (fairly valued) Trinity Industries Inc. (NYSE: TRN) (builds & leases rail cars - 51% undervalued) Greenbrier Companies (NYSE: GBX) (builds rail cars - 20% undervalued) goo.gl Of all the railroads I follow, CSX is the best value proposition but maybe the rail car manufactures would present better value. When you calculate the Graham No. for each of the companies above, you get the following Graham/EKS$ fair values: (Note: EPS must be positive for last 10 year to qualify as a true GN. Also, I am using 2012 EPS AVG earnings estimate and really one should use 2011 actual EPS. So some of these calculations are based on the EKS$ which use positive EPS for last five years and the 2012 EPS avg estimate.) CSX EKS$ $18.77 21% Overvalued from current market price of $22.78. (7 years of positive EPS; TBV $8.56/share, 2012 EPS Avg Est $1.83/share) TRN EKS$ $36.07 51% undervalued from current market price of $23.83/share (6 years of positive EPS in last 7; negative EPS in 2009; TBV $21.10, 2012 EPS avg est $2.74) GBX EKS$ $19.00 20% undervalued from current price of $15.86/share CSX has a lower net income to LT Dept ratio of 4.8x representing low debt and good annual cash flow. TRN's annual net income to LT Debt ratio is 18x which is high and typical for a leasing firm. GBX annual net income to LT Debt is 7.8x much less LT debt. The PE ratio and Forward PE's are as follows: CSX 12.76 11.06 TRN 11.20 7.16 GBX 8.05 5.87 Return on Assets (ttm): CSX 7.54% TRN 4.30% GBX 5.40% Return on Equity (ttm): CSX 21.10% TRN 8.80% GBX 16.22% I bought TRN for it's overall undervalued EKS$. After doing this comparison, maybe GBX is the better value. For me, CSX is just fairly valued and not a screaming Value Buy. I sold my CSX shares about two years ago but if I owned any of the railroads, CSX is the one I would want to own. For the time being, I will pass on the CSX nomination but may come back to it once I review the other proposed candidate stocks. FWIW, a lot of insider selling in all three companies. So maybe the sector is/will be slowing down based on the inside management feelings. EKS