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CSX Corporation (NASDAQ:CSX): Time For A Financial Health Check

The size of CSX Corporation (NASDAQ:CSX), a US$56.75b large-cap, often attracts investors seeking a reliable investment in the stock market. Big corporations are much sought after by risk-averse investors who find diversified revenue streams and strong capital returns attractive. But, the key to their continued success lies in its financial health. This article will examine CSX’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Note that this information is centred entirely on financial health and is a high-level overview, so I encourage you to look further into CSX here. Check out our latest analysis for CSX

Does CSX produce enough cash relative to debt?

CSX has sustained its debt level by about US$11.81b over the last 12 months comprising of short- and long-term debt. At this stable level of debt, CSX’s cash and short-term investments stands at US$419.00m , ready to deploy into the business. Moreover, CSX has produced cash from operations of US$3.47b in the last twelve months, resulting in an operating cash to total debt ratio of 29.40%, meaning that CSX’s operating cash is sufficient to cover its debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In CSX’s case, it is able to generate 0.29x cash from its debt capital.

Can CSX meet its short-term obligations with the cash in hand?

Looking at CSX’s most recent US$1.89b liabilities, it seems that the business has been able to meet these obligations given the level of current assets of US$1.92b, with a current ratio of 1.01x. For Transportation companies, this ratio is within a sensible range as there’s enough of a cash buffer without holding too capital in low return investments.

NasdaqGS:CSX Historical Debt June 21st 18
NasdaqGS:CSX Historical Debt June 21st 18

Can CSX service its debt comfortably?

With debt reaching 95.80% of equity, CSX may be thought of as relatively highly levered. This is not unusual for large-caps since debt tends to be less expensive than equity because interest payments are tax deductible. Consequently, larger-cap organisations tend to enjoy lower cost of capital as a result of easily attained financing, providing an advantage over smaller companies. No matter how high the company’s debt, if it can easily cover the interest payments, it’s considered to be efficient with its use of excess leverage. A company generating earnings after interest and tax at least three times its net interest payments is considered financially sound. For CSX, the ratio of 7.38x suggests that interest is well-covered. Strong interest coverage is seen as a responsible and safe practice, which highlights why most investors believe large-caps such as CSX is a safe investment.

Next Steps:

CSX’s high cash coverage means that, although its debt levels are high, the company is able to utilise its borrowings efficiently in order to generate cash flow. Since there is also no concerns around CSX’s liquidity needs, this may be its optimal capital structure for the time being. Keep in mind I haven’t considered other factors such as how CSX has been performing in the past. I suggest you continue to research CSX to get a better picture of the large-cap by looking at:

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  1. Future Outlook: What are well-informed industry analysts predicting for CSX’s future growth? Take a look at our free research report of analyst consensus for CSX’s outlook.

  2. Valuation: What is CSX worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether CSX is currently mispriced by the market.

  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.


To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.