CSX Corporation (CSX)

Conclusion

CSX Corporation runs a rail freight network of about 20,000 route miles across 26 eastern US states, the District of Columbia and parts of Canada, and also operates a trucking segment. At a share price of 50.48 USD on 9 November 2026, the company has a market capitalisation of 93.5 billion USD and an enterprise value of 111.2 billion USD.

The verdict is overvalued. The price sits above the fair value band of 26.73 to 40.10 USD, with a midpoint of 33.42 USD and a margin of safety of -33.8%. The P/E of 26.1x compares with a ten-year median of 19.7x, EV/EBITDA of 15.5x with 12.1x, and P/FCF of 29.1x with 23.4x. The DCF gives 27.04 USD per share at a discount rate of 10.41%, and the fair value from historical multiples is 39.79 USD. The price implies revenue growth of 13.7% a year in the reverse DCF, against revenue growth of 5.9% a year over five years and a fall of 4.3% a year in free cash flow per share over the same period.

What holds the case up is free cash flow conversion of 89.7% over the last twelve months, a return on invested capital of 13.2% against a WACC of 9.3%, and a share count that fell 4.2% a year over five years. What would break it is a current ratio of 0.84, net debt to EBITDA of 2.47x, and revenue growth of -1.7% a year over three years.

Financial health

Financial strength is yellow: none of the four measures is assessed good, and all four are assessed neutral. At 30 September 2026 the current ratio is 0.84 and the quick ratio 0.72, so short-term liabilities exceed liquid assets. Net debt to EBITDA is 2.47x, debt to equity 1.34 and interest coverage 6.55x on a trailing twelve-month basis. The Altman Z-score is 2.90, in the grey zone; the Altman model was designed for manufacturers, so for a railroad it is only a rough guide. Insolvency risk: low, about 1.0% by the estimate of the Ohlson model over one to two years, based on year-end 2025 figures.

Earnings quality

Earnings quality is green, with two measures assessed good and two neutral. Free cash flow conversion is 89.7% on a trailing basis and 80.8% on average over five years, and the accrual ratio is -4.0%, meaning cash generation exceeds reported earnings. Free cash flow after stock-based compensation is 3.21 billion USD, while stock-based compensation relative to revenue is not available. The share count fell 4.2% a year over five years, consistent with buybacks. The Piotroski score is 5 of 9 and the Beneish M-score is -2.54, a reading that makes manipulation unlikely. Over the last eight quarters, earnings beat expectations five times and missed twice, with an average surprise of 3.1%. Estimates for the current year rose 2.5% over 90 days, and for next year 3.2%, with 13 upward revisions and one downward revision in the last 30 days.

Profitability

Profitability is green: three measures are assessed good and one neutral. The gross margin is 55.4% against a ten-year median of 38.4%. The operating margin is 36.4% against a median of 37.6%, and the net margin is 24.0% against 26.6%. ROIC is 13.2% against a WACC of 9.3%, and the given ROIC minus WACC value is 3.95%, with a five-year median ROIC of 14.6%. Return on equity is 24.9%, but leverage inflates it: the DuPont split for year-end 2025 shows a net margin of 20.5%, an asset turnover of 0.32 and an equity multiplier of 3.32. A large part of the equity return therefore comes from borrowing rather than from the efficiency of the asset base.

Growth

Growth is yellow, with one measure assessed good, two neutral and one bad. Revenue compounded at -1.7% over three years, 5.9% over five years and 1.8% over ten years. Earnings per share compounded at -6.9% over three years, 5.3% over five and 8.8% over ten. Free cash flow per share fell 17.4% a year over three years and 4.3% over five, though it rose 12.9% a year over ten. Revenue grew in 4 of the 10 comparable years, which is the bad assessment. The estimate of 13.8% earnings growth for next year is the one good assessment, but it is a forecast, not a delivered result.

Valuation

Valuation is red: the verdict is overvalued, and that single valuation measure is assessed bad. The P/E of 26.1x is a premium of 32.7% to its ten-year median of 19.7x. EV/EBITDA of 15.5x carries a premium of 27.6% to 12.1x, P/FCF of 29.1x a premium of 24.2% to 23.4x, price to sales of 6.26x a premium of 26.9% to 4.93x, and price to book of 6.50x a premium of 23.7% to 5.26x. The DCF gives 27.04 USD per share at a discount rate of 10.41%, with 5.9% growth in the first stage and 2.5% in the terminal stage; about 49.6% of that value sits in the terminal value. The fair value from historical multiples is 39.79 USD. The fair value band rests on fixed assumptions (a 5% equity risk premium and capped growth) and is an order of magnitude, not a price target. The reverse DCF implies 13.7% growth a year, against 5.9% revenue growth over five years. The dividend yield is 1.09%, the forward yield 1.14%, and the payout on free cash flow 31.8%.

Risks

A current ratio of 0.84 leaves little liquidity buffer if earnings weaken. Net debt to EBITDA of 2.47x and debt to equity of 1.34 make the balance sheet sensitive to borrowing costs, and interest coverage of 6.55x would narrow if operating earnings fell. Revenue growth of -1.7% and earnings growth of -6.9% over three years show that the recent trend is down, so a miss on the 13.8% next-year earnings estimate would make the growth the price implies harder to reach. The price sits above the fair value band, so the share price depends on the premium multiples holding. Not available: stock-based compensation relative to revenue. This analysis has no debt maturity schedule and no revenue split by segment, and its DCF rests on fixed assumptions.