A falling share price can make a perfectly sensible investor behave like someone checking the oven every 30 seconds. Still falling? Better check again. Unfortunately, refreshing the screen won’t tell you whether the business is actually getting worse.
For that, I’d rather count what customers are buying. If demand keeps growing while the shares retreat, investors may be marking down a business that’s still moving forward. That doesn’t announce the bottom, but it gives a buying decision something sturdier than crossed fingers.
Source: Getty Images
Follow the freight
For a railway, one useful number is revenue ton miles. It measures the weight of paying freight multiplied by the distance travelled. More tonnes moving farther generally means more transportation work, although the mix of shipments also affects profitability.
That distinction helps when revenue rises because fuel surcharges or prices increase. A bigger bill doesn’t necessarily mean more customers are shipping goods. Volume offers another check on demand, especially when investors worry about tariffs and slower trade.
It’s the sort of evidence I’d examine during a stock market correction, rather than assuming every cheaper stock deserves a place in my account. Sometimes the discount is entirely deserved. Other times the customers haven’t received the market’s gloomy memo.
That number is 5%
Canadian National Railway (TSX: CNR) reported 5% growth in revenue ton miles during the second quarter. Grain and energy products helped drive that increase. This is evidence of expanding freight activity, even as the stock has since lost ground.
CNR stock moves grain, containers, chemicals, and other goods across a network connecting Canada’s Atlantic and Pacific coasts with the U.S. Gulf Coast. That network is expensive and difficult to replicate. A competitor can’t simply download some tracks and offer free shipping.
Shares recently traded about 8% below July 24 intraday highs of $185.25. That’s a pullback rather than a full 10% correction, but it creates a useful contrast between the price and the latest operating results.
Meanwhile, adjusted quarterly earnings per share (EPS) increased 11%, and management raised its full-year adjusted earnings-growth outlook to the mid-to-high single digits. More freight and stronger earnings give a recovery something tangible to build on. Neither requires investors to guess what tomorrow’s opening bell will bring.
Considerations
There are points to consider. CNR stock’s quarterly dividend is $0.92 per share, or $3.66 annualized. That yields roughly 2.1% at the recent price. It’s useful income, although hardly enough to make valuation irrelevant. Got $5,000? Here’s what a position could produce before fees and taxes, assuming the dividend stays unchanged.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | ANNUAL DIVIDEND | ANNUAL TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| CNR | $170.58 | 29 | $3.66 | $106.14 | Quarterly | $4,946.82 |
The catch is timing. Second-quarter volumes describe business before the latest share-price decline. Tariffs could still reduce cross-border shipments, while higher operating costs could squeeze profits even if freight keeps growing. A good quarter isn’t a lifetime membership in the good-stock club.
I’d therefore watch whether volume growth continues and management maintains its outlook. A reversal in either would weaken the argument that this sell-off is running out of reasons to continue.
Bottom line
For today’s investor, I’d consider a small initial position, leaving room to add after the next results. When buying stocks in Canada, getting the business right is more useful than winning an imaginary prize for the lowest purchase price.
If CNR stock keeps moving more freight and converting that work into higher earnings, today’s pullback could reward investors who started before the recovery looked obvious. The next volume report will tell us considerably more than another afternoon spent refreshing the chart.
