CSX Corporation: Declining Profitability, Negative Risk Premium, Avoid
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Patrick Doyle7.34K FollowersFollow5ShareSavePlay(11min)CommentsSummaryCSX Corporation is less profitable now than pre-Covid, with a deteriorating capital structure and declining revenue trends.CSX trades at a rich valuation—over $4.80 per $1 of sales—about 40% more expensive than the S&P 500 on this metric.Market expectations for CSX imply a 6.5% perpetual growth rate, which is historically unsupported given recent stagnation.I recommend avoiding CSX at current levels, as Treasury Notes offer higher, safer yields and better risk-adjusted returns.Martin Stoyanov/iStock via Getty Images It's been just shy of eight months since I published an article arguing that Treasury Notes were a more compelling investment than CSX Corporation (CSX). Since then, the shares have returned about 34% against aThis article was written byPatrick Doyle7.34K FollowersFollowI'm a quant investment newsletter writer who marries fundamental analysis with the latest research in momentum. Over the past few years, I’ve developed a piece of software that helps me track the level of optimism and pessimism embedded in stock price. I seek to challenge the assumptions embedded in price by profitably exploiting the disconnect between what the market thinks and what is a likely outcome. I invest in those companies that have a greater than average chance of giving us all a surprise in the next few months.Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.Recommended For You