At US$199, Is It Time To Put Union Pacific Corporation (NYSE:UNP) On Your Watch List?

Let's talk about the popular Union Pacific Corporation (NYSE:UNP). The company's shares received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$215 at one point, and dropping to the lows of US$186. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Union Pacific's current trading price of US$199 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Union Pacific’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Union Pacific

Is Union Pacific Still Cheap?

According to my valuation model, the stock is currently overvalued by about 23%, trading at US$199 compared to my intrinsic value of $162.82. This means that the opportunity to buy Union Pacific at a good price has disappeared! But, is there another opportunity to buy low in the future? Given that Union Pacific’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Union Pacific generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by a double-digit 11% over the next couple of years, the outlook is positive for Union Pacific. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in UNP’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe UNP should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on UNP for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for UNP, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Union Pacific as a business, it's important to be aware of any risks it's facing. For example - Union Pacific has 1 warning sign we think you should be aware of.

If you are no longer interested in Union Pacific, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.

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