Is There A Better Pick Over CSX Corporation Stock?

We think that Intuit stock (NASDAQ: INTU), a company that specializes in financial and tax preparation software, currently is a better pick compared to CSX Corporation stock (NASDAQ: CSX), despite INTU being more expensive of the two with its P/S ratio of 12.4x, compared to 5.9x for CSX. We compare these two companies due to their similar revenue base. Although both the companies saw a rise in revenue over the last twelve months, the growth has been much better for Intuit.

If we look at stock returns, Intuit’s 13% growth is better than 7% for CSX over the last year. While both the companies are likely to see continued top-line expansion, Intuit is expected to outperform. There is more to the comparison, and in the sections below, we discuss why we believe that INTU stock will offer better returns over the next three years. We compare a slew of factors such as historical revenue growth, returns, and valuation multiple in an interactive dashboard analysis CSX vs. Intuit: Which Stock Is A Better Bet? Parts of the analysis are summarized below.

1. Intuit’s Revenue Growth Has Been Stronger

• Both companies managed to see sales growth over the recent quarters, but Intuit has witnessed a comparatively faster revenue growth. Looking at a longer time frame, Intuit’s sales have jumped from $5.2 billion in 2017 to $10.3 billion over the last twelve months, while CSX’s revenues have risen from $11.4 billion to $12.5 billion over the same period.
• For CSX, the recent revenue growth has been impacted by a decline in demand for automotive shipments owing to the impact of the  semiconductor chip shortage on the overall production in the recent past, while its coal shipments have been trending higher due to rising natural gas prices, a trend expected to continue in the near term.
• For Intuit, the strong revenue growth over the recent past can be attributed to more people and small businesses opting to file tax returns on their own rather than visiting an accountant, especially since the beginning of the Covid-19 pandemic. Furthermore, in Q2FY21, the company acquired Credit Karma (now a separate reportable segment), which garnered $416 million revenue in Q1FY22. The segment offers personalized recommendations of credit card, home, auto, and personal loans, and insurance products, among others, to its customers. It generates revenue from cost-per-action transactions related to credit card issuances and private loan funding.
• Our CSX Corporation Revenue and Intuit Revenue dashboards provide more insight into the companies’ sales.
• Now, Intuit’s revenue growth of 32% over the last twelve-month period is much better than the 18% growth for CSX, partly due to the Credit Karma acquisition.
• Even if we were to look at a slightly longer time frame, Intuit has outperformed CSX with its last three-year revenue CAGR of 17%, compared to 2% for CSX.
• Looking forward, Intuit’s revenue is expected to grow at a faster pace compared to CSX over the next three years. The table below summarizes our revenue expectations for the two companies over the next three years. It points to a CAGR of 11% for Intuit, compared to just 2% CAGR for CSX, based on Trefis Machine Learning analysis.
• Note that we have different methodologies for companies negatively impacted by Covid and for companies not impacted or positively impacted by Covid while forecasting future revenues. For companies negatively affected by Covid, we consider the quarterly revenue recovery trajectory to forecast recovery to the pre-Covid revenue run rate. Beyond the recovery point, we apply the average annual growth observed in the three years before Covid to simulate return to normal conditions. For companies registering positive revenue growth during Covid, we consider yearly average growth before Covid with a certain weight to growth during Covid and the last twelve months.

2. CSX Is More Profitable But Comes At An Extra Risk

• CSX’s operating margin of 38.9% over the last twelve months is much better than 24.1% for Intuit.
• Furthermore, if we look at the recent margin growth, CSX has fared better than Intuit, with the last twelve months vs. last three-year margin change at 2.8% for CSX, compared to -3.1% change for Intuit.
• Historically, CSX’s operating margins have been superior compared to Intuit. While CSX’s operating margin rose from 27.1% in 2017 to 38.9% currently, Intuit’s operating margin declined from levels of 27.3% to 24.1% over the same period. Our CSX Corporation Operating Income and Intuit Operating Income dashboards have more details.
• Looking at financial risk, Intuit is better than CSX. Intuit’s 1.6% debt as a percentage of equity is much lower than 22.0% for CSX, while it’s 22.4% cash as a percentage of assets is much higher than 5.5% for CSX, implying that Intuit has a better debt and cash position.

3. The Net of It All

• We see that Intuit has demonstrated better revenue growth over CSX over the last three years, and it comes at a lower financial risk. However, the latter is more profitable and available at a relatively lower valuation.
• Now, looking at prospects, using P/S as a base, due to high fluctuations in P/E and P/EBIT, we believe INTU is currently the better choice of the two.
• The table below summarizes our revenue and return expectation for CSX and Intuit over the next three years and points to an expected return of 31% for INTU over this period vs. -4% expected return for CSX stock, implying that investors are better off buying INTU over CSX, based on Trefis Machine Learning analysis – CSX vs. Intuit – which also provides more details on how we arrive at these numbers.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.

[1] Month-to-date and year-to-date as of 2/24/2022
[2] Cumulative total returns since the end of 2016

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