Can CSX Railroad's Run Continue?
CSX Corporation (NYSE: CSX) shares are ripping higher after casually holding uptrend line support during the most recent market volatility a couple of weeks ago.
Looking at the whole picture, do the fundamentals justify the technical strength?
What The Bulls See...
• An enterprise value of $43.7 billion that trumps a market capitalization of $35.4 billion
• A price-to-sales ratio of 2.81
• 14.89 percent net profit margins that spin off more than $700 million in annual levered free cash flow
• Decent balance sheet metrics with a debt-to-equity ratio of 86.31 percent and a current ratio of 1.2
• A dividend yield of 1.8 percent
What The Bears See...
• A P/E of 17 compared to estimated 2015 revenue and EPS growth of 4.3 percent and 13.1 percent, respectively
• A price-to-book ratio of 3.16
The Technical Take
As technicians note, CSX sports third wave Fibonacci projected resistance at $35.52. Friday's close above that level could nullify the technicians' wave count and open up more upside potential.
Below $32.06, however, the next level of support for CSX comes in at the October lows at $29.75. Above the $35.52 projection, the next upside target wouldn't come into play until between $45 and $48.
The question appears to be: Will euphoric market conditions give the bulls the belief needed to continue the rally?
As a matter of discipline, it may be a good idea to buy only on a dip to identifiable support at $32.06 or $29.75. The technicals are so strong, in fact, that aggressively shorting CSX is only for the most nimble of traders.
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