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VALUATION SCENARIOS - DISCOUNTED CASH FLOW (DCF) ANALYSIS
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📊 DYNAMIC GROWTH RATE CALCULATION FOR CP
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Historical Data Inputs:
  • Revenue CAGR 13yr: 7.8%
  • EPS CAGR 13yr: 17.6%
  • Quality boost: Operating Margin 37.0% (>30%)

Weighted Historical Growth: 12.7%
Industry: Railroads (Industrials)
Industry Growth Modifier: +0.0%
Quality Adjustments: +1.0%

Growth Rates (10-year projection):
  🔻 Bear Case: 6.0% (conservative, recession-resistant)
  ⚖️  Base Case: 10.0% (sustainable, achievable)
  🔺 Bull Case: 10.0% (optimistic, strong execution)

Growth Rate Bounds:
  • Industry floor: 1.0%
  • Industry ceiling: 10.0%


Stock: CP
Current Price: $72.38
Shares Outstanding: 0.93B (933,344,882 shares)

Base Year FCF (FY 2024): $2.5B (from financial statements)

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BEAR CASE (Probability: 25%)
Conservative: Below-trend growth, elevated risk premium, modest recession impact

ASSUMPTIONS:
  • FCF Growth Rate (Years 1-10): 6.0%
  • Discount Rate (WACC): 12.0%
  • Terminal Growth Rate: 2.0%

10-YEAR FCF PROJECTION:
Year     FCF ($M)        PV Factor    PV of FCF ($M) 
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1        $2,621,380,000      0.8929 $2,340,517,857
2        $2,778,662,800      0.7972 $2,215,132,972
3        $2,945,382,568      0.7118 $2,096,465,134
4        $3,122,105,522      0.6355 $1,984,154,502
5        $3,309,431,853      0.5674 $1,877,860,511
6        $3,507,997,765      0.5066 $1,777,260,841
7        $3,718,477,630      0.4523 $1,682,050,438
8        $3,941,586,288      0.4039 $1,591,940,593
9        $4,178,081,466      0.3606 $1,506,658,062
10       $4,428,766,354      0.3220 $1,425,944,237
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Total PV of 10-Year FCF:            $18,497,985,147

TERMINAL VALUE:
  • Year 11 FCF: $4,517,341,681
  • Terminal Value: $45,173,416,806
  • PV of Terminal Value: $14,544,631,217

VALUATION SUMMARY:
  • Enterprise Value: $33.0B
  • Shares Outstanding: 0.93B
  • Intrinsic Value per Share: $35.40
  • Current Price: $72.38
  • Upside/Downside: -51.1%
  • Margin of Safety: -104.4%
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BASE CASE (Probability: 50%)
Balanced: Sustainable growth trajectory, market-appropriate discount rate, realistic perpetuity assumptions

ASSUMPTIONS:
  • FCF Growth Rate (Years 1-10): 10.0%
  • Discount Rate (WACC): 10.0%
  • Terminal Growth Rate: 2.5%

10-YEAR FCF PROJECTION:
Year     FCF ($M)        PV Factor    PV of FCF ($M) 
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1        $2,720,300,000      0.9091 $2,473,000,000
2        $2,992,330,000      0.8264 $2,473,000,000
3        $3,291,563,000      0.7513 $2,473,000,000
4        $3,620,719,300      0.6830 $2,473,000,000
5        $3,982,791,230      0.6209 $2,473,000,000
6        $4,381,070,353      0.5645 $2,473,000,000
7        $4,819,177,388      0.5132 $2,473,000,000
8        $5,301,095,127      0.4665 $2,473,000,000
9        $5,831,204,640      0.4241 $2,473,000,000
10       $6,414,325,104      0.3855 $2,473,000,000
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Total PV of 10-Year FCF:            $24,730,000,000

TERMINAL VALUE:
  • Year 11 FCF: $6,574,683,231
  • Terminal Value: $87,662,443,086
  • PV of Terminal Value: $33,797,666,667

VALUATION SUMMARY:
  • Enterprise Value: $58.5B
  • Shares Outstanding: 0.93B
  • Intrinsic Value per Share: $62.71
  • Current Price: $72.38
  • Upside/Downside: -13.4%
  • Margin of Safety: -15.4%
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BULL CASE (Probability: 25%)
Optimistic: Strong execution, market share gains, operating leverage, sustained competitive advantages

ASSUMPTIONS:
  • FCF Growth Rate (Years 1-10): 10.0%
  • Discount Rate (WACC): 9.0%
  • Terminal Growth Rate: 3.0%

10-YEAR FCF PROJECTION:
Year     FCF ($M)        PV Factor    PV of FCF ($M) 
------------------------------------------------------------
1        $2,720,300,000      0.9174 $2,495,688,073
2        $2,992,330,000      0.8417 $2,518,584,294
3        $3,291,563,000      0.7722 $2,541,690,572
4        $3,620,719,300      0.7084 $2,565,008,834
5        $3,982,791,230      0.6499 $2,588,541,025
6        $4,381,070,353      0.5963 $2,612,289,108
7        $4,819,177,388      0.5470 $2,636,255,063
8        $5,301,095,127      0.5019 $2,660,440,890
9        $5,831,204,640      0.4604 $2,684,848,604
10       $6,414,325,104      0.4224 $2,709,480,243
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Total PV of 10-Year FCF:            $26,012,826,708

TERMINAL VALUE:
  • Year 11 FCF: $6,606,754,857
  • Terminal Value: $110,112,580,949
  • PV of Terminal Value: $46,512,744,168

VALUATION SUMMARY:
  • Enterprise Value: $72.5B
  • Shares Outstanding: 0.93B
  • Intrinsic Value per Share: $77.71
  • Current Price: $72.38
  • Upside/Downside: +7.4%
  • Margin of Safety: 6.9%
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SENSITIVITY ANALYSIS - Intrinsic Value per Share
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How intrinsic value changes with different growth and discount rates:

Growth →           3%          5%          8%         10%         12%         15%   
WACC ↓      ------------------------------------------------------------------
   8%    $    51↓  $    60↓  $    76   $    89   $   104↑  $   131↑ 
   9%    $    43↓  $    50↓  $    63↓  $    74   $    86   $   107↑ 
  10%    $    38↓  $    43↓  $    54↓  $    63↓  $    73   $    91  
  11%    $    33↓  $    38↓  $    47↓  $    54↓  $    63↓  $    78  
  12%    $    30↓  $    34↓  $    42↓  $    48↓  $    55↓  $    68  

Current Price: $72.38
Base FCF: $2,473,000,000M
Terminal Growth: 2.5% (constant)

Legend: ↑ = 30%+ upside  |  ↓ = 10%+ downside
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PROBABILITY-WEIGHTED VALUATION
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Bear Case (35.40) × 25%  = $8.85
Base Case (62.71) × 50%  = $31.36
Bull Case (77.71) × 25%  = $19.43

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Weighted Average Intrinsic Value: $59.63
Current Price: $72.38
Upside/Downside: -17.6%
Margin of Safety: -21.4%
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