If you are looking at Norfolk Southern and wondering whether the current share price lines up with the underlying business, you are in the right place for a closer look at value.
The stock last closed at US$314.94, with recent returns of 3.0% over 7 days, 8.4% over 30 days, 9.4% year to date, 25.5% over 1 year, 47.7% over 3 years and 34.3% over 5 years.
Recent headlines around Norfolk Southern have focused on the company itself and the broader rail industry, giving investors more context for how the market is treating the shares. These updates help frame whether the recent price moves are being driven more by sentiment or by changes in expectations for the business.
Right now, Norfolk Southern has a valuation score of 2 out of 6. This means it screens as undervalued on 2 of the 6 checks we use. Next, we will look at how different valuation methods line up on the stock, before finishing with an even more complete way to think about its value.
Norfolk Southern scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
A Discounted Cash Flow, or DCF, model takes the cash Norfolk Southern is expected to generate in the future and discounts those amounts back to today, giving a single estimate of what the business could be worth right now.
For Norfolk Southern, the latest twelve month Free Cash Flow is about $1.50b. Using a 2 Stage Free Cash Flow to Equity model, analysts and extrapolated estimates project Free Cash Flow out over the next decade, reaching a forecast of $2.78b in 2030. The near term projections out to 2027 are based on analyst estimates, while the later years are extrapolated by Simply Wall St using modest growth assumptions.
When all those projected cash flows are discounted back, the model arrives at an estimated intrinsic value of $209.38 per share. Compared with the recent share price of $314.94, this implies the stock is around 50.4% overvalued according to this DCF approach.
For a profitable company like Norfolk Southern, the P/E ratio is a useful quick check because it links what you pay for each share to the earnings the business is already generating.
What counts as a “normal” P/E depends on how fast earnings are expected to grow and how risky those earnings are. Higher expected growth or lower perceived risk can justify a higher P/E, while lower growth or higher risk usually supports a lower one.
Norfolk Southern currently trades on a P/E of 24.6x. That sits below the Transportation industry average of 36.9x and also below the peer group average of 26.9x, so on simple comparisons the stock looks cheaper than many similar names.
Simply Wall St’s Fair Ratio for Norfolk Southern is 20.2x. This is a proprietary estimate of what the P/E might be, given factors such as the company’s earnings growth profile, profit margins, industry, market cap and specific risks. Because it blends these fundamentals rather than relying only on broad industry or peer comparisons, it can give a more tailored view of what a reasonable multiple could be.
With the actual P/E of 24.6x above the Fair Ratio of 20.2x, Norfolk Southern currently screens as trading richer than that fair value estimate.
Earlier we mentioned that there is an even better way to understand valuation. On Simply Wall St’s Community page you can use Narratives to spell out your view of Norfolk Southern’s story, link that story to specific forecasts for revenue, earnings and margins, translate those forecasts into a Fair Value that you can compare directly with the current share price to help you decide if and when to buy or sell, and then see that Fair Value update automatically as new earnings or merger news arrives. This is why some investors might build a more optimistic Norfolk Southern Narrative around a Fair Value close to US$339, while others may anchor on a more cautious view closer to US$235, all within the same easy to use framework.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
