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Why Norfolk Southern Corporation (NYSE:NSC) Could Be Worth Watching

Let's talk about the popular Norfolk Southern Corporation (NYSE:NSC). The company's shares saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine Norfolk Southern’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Norfolk Southern

What is Norfolk Southern worth?

Norfolk Southern appears to be overvalued by 34% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$288 on the market compared to my intrinsic value of $215.30. Not the best news for investors looking to buy! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Norfolk Southern’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Norfolk Southern?

earnings-and-revenue-growth
earnings-and-revenue-growth

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Norfolk Southern's earnings over the next few years are expected to increase by 20%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in NSC’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe NSC should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on NSC for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for NSC, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Norfolk Southern as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 1 warning sign for Norfolk Southern you should know about.

If you are no longer interested in Norfolk Southern, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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