In a sea of stocks that have fallen away, Canadian Pacific Kansas City (TSX:CP) stock has been a rose among the thorns. Yet if you think the climb for CP stock is done now, you have another thing coming.
What happened?
Over the last year, shares of CP stock were on the climb, as it looked imminent the stock would acquire Kansas City Southern. Then finally, after years of waiting, the United States Surface Transportation Board approved the merger.
Not everyone was happy about it, because that would be a perfect world that simply doesn’t exist. In this case, current shareholders didn’t like their dividends being sliced in two. Further, they didn’t enjoy the fact that this would plague the company with billions in debt for years.
Even so, shares of CP stock are up 14% in the last year alone. Yet in the last month or so, shares have come back down by about 8%, as of writing.
Value to be had
Now is therefore a great time for investors to consider CP stock. The company saw shares fall back about a month ago, and now there is a great opportunity to pick it up while the numbers are down — because it won’t be for long.
The last earnings report merely noted that it was official that CP and Kansas City Southern were now merged. Yet there is still to be a full quarter, never mind a full year, of revenue to report from the merge. In fact, there will be cost-saving synergies thanks to the acquisition.
Meanwhile, CP stock now has access to the entirety of North America — something no other railway can claim right now. And that’s what makes it a solid long-term hold today.
Similar growth to come
In the last decade, CP stock went through an overhaul of its finances. Because of this, the company was able to afford the purchase ahead of other companies. There was a ton of growth in the last decade because of this overhaul, with shares climbing 320% during that time.
If future growth looks correct, it seems that this could certainly occur once more. The company will have even more revenue at its fingertips thanks to the current position of Kansas City Southern. However, it’s quite likely to bring on even more clients considering it’s the only railway to run from Canada to Mexico.
Because of this, there is certainly another upcoming period of growth in the next decade — one that could indeed outpace the last 10 years. So, even with the company trading at 26.05 times earnings as of writing, and shares nearing 52-week highs, CP stock is still a great long-term buy at this point.
Bottom line
While CP stock may have already seen a large amount of growth in the last decade, this could certainly repeat itself in the next 10 years as well. CP stock offers an entirely new revenue stream from this merger, with enormous growth already from the announcement alone. Once revenue starts flowing in from across North America, it’s practically guaranteed that shares will only rise higher.
