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

To: Sergio H who wrote (2169)	8/7/2012 6:51:27 AM
From: bruwin	Read Replies (1) \| Respond to of 4721

I see on the thread header that Bruwin changed his vote from CSX to UNP.” Are you sure ? I checked my Board’s “history” and I don’t see any entry of mine for CSX. I believe UNP is the only rail stock I’ve voted for thus far. Below is a “Metrics” comparison between CSX and UNP. The way I see it UNP comes out ahead … ” 1) Since both their Revenue lows for 2009, we’ve seen UNP improve its top line Revenue by 38% in 2 years compared to CSX’s number of 30%. 2) UNP’s SG&A/Revenue is at 24% compared to CSX at 26%. That’s not much of a difference but UNP is ahead in that regard. 3) UNP has less Debt effect on its Income Statement than CSX where we have 9.8% of EBIT compared to 16%. However, in both companies we are seeing a decline in that regard. We also see that UNP’s Long Term Debt requires 2.6 times Net Earnings to “cover” it, whereas CSX requires a larger 4.8 times Net Earnings. 4) UNP’s bottom line is showing a better Net Profit of 16.8% compared to CSX at 15.5%. 5) UNP currently has a better EBITDA Margin of 41.5% compared to 37.4% of CSX. However, in both cases those a very good numbers. You don’t often see that amount of Revenue left over after CoS and SG&A are deducted. 6) CSX is showing a better ROE of 21.5% compared to 17.7% of UNP. This would be even better if one didn’t deduct -$5.3bil. of “Treasury Stock” from UNP’s Equity. But there again, UNP has been buying back $5.3bil. of its own shares whereas CSX hasn’t bought back anything. As we know Buffett likes to see share buy backs on a company’s Balance Sheet. 7) In contrast to CSX and UNP’s ROE we see that UNP has done better with regard to Pretax Return on Capital Employed. Here we see 12.6% compared to 10.8%. Personally I prefer this ratio to ROE because one is taking into account the Capital that a company has to employ in terms of Share Cap.+Retained Earnings+Long Term Debt+Deferred Tax. And one is also considering the Pretax Income which is not influenced by a possible “unbalanced” Tax deduction or once off post tax income etc…, as could be the case with Net Income. Buffett also uses that Pretax Income, per share, figure when he works out his “Equity Bond” relative to a company’s share price.