![]() ![]() ![]() Risks: You should be aware of the 1 warning sign for Union Pacific we've uncovered before considering an investment in the company.įuture Earnings: How does UNP's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. For Union Pacific, we've put together three further factors you should look at: Rather it should be seen as a guide to "what assumptions need to be true for this stock to be under/overvalued?" If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. It's not possible to obtain a foolproof valuation with a DCF model. Valuation is only one side of the coin in terms of building your investment thesis, and it ideally won't be the sole piece of analysis you scrutinize for a company. Good value based on P/E ratio compared to estimated Fair P/E ratio.Īnnual earnings are forecast to grow slower than the American market. SWOT Analysis for Union PacificĮarnings growth over the past year exceeded its 5-year average.ĭebt is well covered by earnings and cashflows.ĭividends are covered by earnings and cash flows.Įarnings growth over the past year underperformed the Transportation industry.ĭividend is low compared to the top 25% of dividend payers in the Transportation market.Īnnual earnings are forecast to grow for the next 3 years. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. ![]() Beta is a measure of a stock's volatility, compared to the market as a whole. In this calculation we've used 8.5%, which is based on a levered beta of 1.082. Given that we are looking at Union Pacific as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. If you don't agree with these result, have a go at the calculation yourself and play with the assumptions. We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. Generally we assume that a dollar today is more valuable than a dollar in the future, so we discount the value of these future cash flows to their estimated value in today's dollars: We do this to reflect that growth tends to slow more in the early years than it does in later years. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. In the first stage we need to estimate the cash flows to the business over the next ten years. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. See our latest analysis for Union Pacific The Model If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model. Models like these may appear beyond the comprehension of a lay person, but they're fairly easy to follow.Ĭompanies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. We will use the Discounted Cash Flow (DCF) model on this occasion. With US$186 share price, Union Pacific appears to be trading close to its estimated fair valueĪnalyst price target for UNP is US$221, which is 39% above our fair value estimateĭoes the March share price for Union Pacific Corporation ( NYSE:UNP) reflect what it's really worth? Today, we will estimate the stock's intrinsic value by taking the expected future cash flows and discounting them to their present value. Union Pacific's estimated fair value is US$159 based on 2 Stage Free Cash Flow to Equity ![]()
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