This Company Is Likely To Offer Better Returns Over CSX Stock

CSX: CSX logo

Despite its comparatively higher valuation, we think Booking Holdings stock (NASDAQ: BKNG) is currently a better pick than CSX stock (NASDAQ: CSX). BKNG stock is trading at 8.6x trailing revenues compared to 6.2x for CSX stock. We compare these two companies due to their similar revenue base. Although both the companies have seen a rise in revenue over the recent past, Booking Holdings has fared much better.

If we look at stock returns, CSX’s 4% growth is better than the -10% change for Booking Holdings over the last twelve months. This compares with 7% growth in the broader S&P 500 index. While both the companies are likely to see continued top-line expansion, Booking Holdings is expected to outperform. There is more to the comparison, and in the sections below, we discuss why we believe that BKNG stock will offer better returns than CSX stock in the next three years. We compare a slew of factors such as historical revenue growth, returns, and valuation multiple in an interactive dashboard analysis of CSX vs. Booking HoldingsWhich Stock Is A Better Bet? Parts of the analysis are summarized below.

1. Booking Holdings’ Revenue Growth Has Been Stronger

  • Both companies posted sales growth over the last twelve months. Still, Booking Holdings’ revenue growth of 61% is much higher than 18% for CSX.
  • Looking at a longer time frame, CSX’s sales grew 1.6% to $12.5 billion in 2021, compared to $12.3 billion in 2018, while Booking Holdings’ sales declined 32% to $11.0 billion in 2021, compared to around $14.5  billion in 2018.
  • CSX’s revenue growth was adversely impacted in 2020 due to the pandemic, but the recovery in 2021 was strong. While automotive shipments were adversely affected due to the semiconductor chip shortage affecting the overall production, the rise in natural gas prices boded well for coal demand, bolstering the coal shipments growth for CSX in 2021. The U.S. coal production is expected to see a mid-single-digit y-o-y growth in 2022, supporting its transportation demand for railroad companies. [1]
  • Booking Holdings’ revenue growth was significantly impacted amid lockdowns and shelter-in-place restrictions during the pandemic. The 2020 sales plunged 54% to $6.8 billion from $15.1 billion in 2019.
  • However, with economies opening up globally, travel has picked up pace, resulting in a sharp 61% spike in Booking Holdings’ sales over the last twelve months.
  • Furthermore, Booking Holdings derives a majority of its revenue from the European market, which has undertaken a series of economic measures in response to Russia’s invasion of Ukraine. A decline in travelers from Russia, who are currently under a ban, is likely to have a modest impact on Booking Holdings’ business.
  • Our CSX Revenue and Booking Holdings Revenue dashboards provide more insight into the companies’ sales.
  • Looking forward, Booking Holdings’ revenue is expected to grow faster than 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 2.3% for CSX, compared to a 14.7% CAGR for Booking Holdings, 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 a 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.
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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 25.8% for Booking Holdings
  • This compares with 35.4% and 37.2% figures seen in 2019, before the pandemic, respectively.
  • CSX’s free cash flow margin of 41% is also better than 26% for Booking Holdings.
  • Our CSX Corporation Operating Income and Booking Holdings Operating Income dashboards have more details.
  • Looking at financial risk, Booking Holding is better placed than CSX. Its 11% debt as a percentage of equity is lower than 21% for CSX, while its 47% cash as a percentage of assets is much higher than just 5% for CSX, implying that Booking Holdings has a better debt position and it has more cash cushion.

3. The Net of It All

  • We see that Booking Holdings has demonstrated better revenue growth over CSX in the recent past, and it comes at a lower financial risk. However, CSX has seen better revenue growth, in the long run, and it 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 Booking Holdings is currently the better choice of the two.
  • The table below summarizes our revenue and return expectation for both companies over the next three years and points to an expected return of 28% for BKNG over this period vs. -6% expected return for CSX stock, implying that investors are better off buying BKNG over CSX, based on Trefis Machine Learning analysis – CSX vs. Booking Holdings – which also provides more details on how we arrive at these numbers.

While BKNG stock is likely to outperform CSX in the future, it is helpful to see how CSX’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for CSX vs. Amkor.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Apr 2022
MTD [1]
YTD [1]
Total [2]
CSX Return -9% -9% 186%
BKNG Return -8% -10% 48%
S&P 500 Return -3% -7% 97%
Trefis Multi-Strategy Portfolio -1% -9% 259%

[1] Month-to-date and year-to-date as of 4/12/2022
[2] Cumulative total returns since the end of 2016

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  1. Short Term Energy Outlook, U.S. Energy Information Administration, Mar 8, 2022 []