Norfolk Southern Corporation (NSC)

Conclusion

Norfolk Southern Corporation is a US railroad that moves agricultural, chemical, metal, automotive and intermodal freight. At a price of 325.82 USD on 9 November 2026, its market capitalisation is 73.2 billion USD.

The verdict is overvalued. Today's multiples sit above their own ten-year medians: P/E is 27.3 against a median of 21.6, EV/EBITDA is 16.1 against 13.2, and P/FCF is 44.4 against 29.8. The DCF gives 101.25 USD per share at a discount rate of 10.8%. The fair value band runs from 143.63 to 215.45 USD with a midpoint of 179.54 USD, a margin of safety of -44.9%. The fair value from historical multiples is 257.83 USD. The reverse DCF implies growth of 20.3% a year, while revenue grew 4.5% a year over five years and free cash flow per share grew 2.8%.

The case rests on strong earnings quality, with a Piotroski score of 7 of 9, a Beneish M-score of -3.70 (unlikely manipulation) and a share count that fell 2.6% a year over five years. The weakest numbers are the P/FCF premium of 49.2% over its median, ROIC of 10.1% against a WACC of 9.5%, and net debt to EBITDA of 2.73x alongside a current ratio of 0.90.

Financial health

Financial strength is yellow: the current ratio (0.90), quick ratio (0.77), net debt to EBITDA (2.73x) and interest coverage (5.2x) are all assessed as neutral, so none of them supports or weakens the case on its own. Debt to equity is 0.99. The Altman Z-score is 2.51, in the grey zone. The Altman model was designed for manufacturers, and this company is a railroad, so the reading should be treated with care. Insolvency risk: low, about 0.7% by the estimate of the Ohlson model over one to two years.

Earnings quality

Earnings quality is green. The Piotroski score of 7 of 9, the Beneish M-score of -3.70 (unlikely manipulation) and the five-year share count decline of 2.6% a year (buybacks) are all assessed as good. Free cash flow conversion is neutral at 61.4% on a trailing basis and 71.5% over five years. The accrual ratio is -3.4%. Stock-based compensation as a share of revenue is not available. Free cash flow after stock-based compensation is 1.6 billion USD on a trailing basis. The company beat estimates in seven of the last eight quarters, with an average surprise of 5.3%. Next-year earnings estimates rose 1.7% over the last 90 days, with 15 upward revisions and 3 downward in the last 30 days.

Profitability

Profitability is green. The gross margin of 52.9% is well above its ten-year median of 34.6%. The operating margin of 31.5% is close to its median of 33.9%, and the net margin of 20.7% is below its median of 23.4%. Margin stability is 12.1%. ROIC is 10.1% against a WACC of 9.5%, a ROIC minus WACC value of 0.6 percentage points, which is neutral, and the five-year median ROIC is 11.2%. ROE of 16.0% is flattered by leverage. The DuPont split shows a net margin of 23.6%, an asset turnover of 0.27 and an equity multiplier of 2.91.

Growth

Growth is green. EPS compound growth is -2.7% over three years, 10.3% over five years and 9.6% over ten years. Revenue compound growth is -1.5% over three years, 4.5% over five years and 1.5% over ten years. Revenue grew in 5 of the 10 comparable years. Free cash flow per share grew 2.8% a year over five years and 19.5% over ten years, but fell 0.2% a year over three years. The next-year EPS growth estimate is 11.3%, which is assessed as good.

Valuation

Valuation is red. Current multiples carry premiums to their ten-year medians of 26.4% on P/E, 21.4% on EV/EBITDA, 49.2% on P/FCF, 20.2% on P/S and 5.8% on P/B. The free cash flow yield is 2.25% and the earnings yield is 3.67%. The DCF gives 101.25 USD per share at a discount rate of 10.8%, with first-stage growth of 4.5% and terminal growth of 2.5%. The terminal value makes up 47.3% of that figure. The fair value band is 143.63 to 215.45 USD, with a midpoint of 179.54 USD. The reverse DCF implies growth of 20.3%. The fair value is an order of magnitude built on fixed assumptions, including a 5% equity risk premium and capped growth, and is not a price target. The dividend yield is 1.7% and the payout on free cash flow is 73.7%.

Risks

A current ratio of 0.90 and net debt of 2.73x EBITDA leave limited room if earnings or refinancing costs weaken. ROIC of 10.1% sits only slightly above WACC of 9.5%, so growth adds little value unless returns improve. Trailing free cash flow conversion of 61.4% is below the five-year figure of 71.5%, which would weigh on earnings quality if it persists. The three-year EPS decline of 2.7% shows that recent growth has been weak. P/FCF of 44.4 leaves the price exposed if growth slows. Stock-based compensation as a share of revenue is not available. This analysis has no debt maturity schedule and no revenue split by segment, so refinancing timing and the mix of business lines cannot be assessed.