Why Union Pacific Stock Is Rated a "Buy With Caution" Before Earnings
Union Pacific (NYSE: UNP) is an $88 billion company today. Investors that bought shares one year ago are sitting on an 18.29% total return. That's above the S&P 500's return of 15.92%.
Union Pacific stock is beating the market, and it reports earnings next week. But does that make it a good buy today? To answer this question, we've turned to the Investment U Stock Grader. Our Research Team built this system to diagnose the financial health of a company.
Our system looks at six key metrics...
✗ Earnings-per-Share (EPS) Growth: Union Pacific reported a recent EPS growth rate of 13.79%. That's below the road and rail industry average of 35.09%. That's not a good sign. We like to see companies that have higher earnings growth.
✓ Price-to-Earnings (P/E): The average price-to-earnings ratio of the road and rail industry is 24.92. And Union Pacific's ratio comes in at 21.10. It's trading at a better value than many of its competitors.
✓ Debt-to-Equity : The debt-to-equity ratio for Union Pacific stock is 76.22%. That's below the road and rail industry average of 293.59%. The company is less leveraged.
✗ Free Cash Flow per Share Growth : Union Pacific's FCF has been lower than that of its competitors over the last year. That's not good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It's one of our most important fundamental factors.
✓ Profit Margins : The profit margin of Union Pacific comes in at 20.89% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. Union Pacific's profit margin is above the road and rail average of 8.29%. So that's a positive indicator for investors.
✓ Return on Equity : Return on equity tells us how much profit a company produces with the money shareholders invest. The ROE for Union Pacific is 21.52%, and that's above its industry average ROE of 12.27%.
Union Pacific stock passes four of our six key metrics today. That's why our Investment U Stock Grader rates it as a Buy With Caution.
Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That's why The Oxford Club offers more than a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth.
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