Union Pacific Corporation
Mr. Market is asking $284.28 for the business today.
The business is worth approximately $676.97.
That is a Δ of +138.1% from price to fair value. Mr. Market is offering UNP below our 25% margin of safety. Worth a closer look.
Subscribe to read the full reckoning on UNP.
Mr. Market is asking $284.28. We say it's worth $676.97. The full eight-step audit follows for subscribers.
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The Reckoning
Eight steps. Every input is visible. Every formula is on the page. The same protocol is applied to every stock — consistency is most of the discipline.
Data validation
Garbage in, garbage out. Before any math runs, we confirm we have what the protocol requires.
| Operating Cash Flow > 0 | ✓ |
| Depreciation & Amortization exists | ✓ |
| Diluted shares outstanding > 0 | ✓ |
| At least 3 forward EPS estimates (we have 10) | ✓ |
Owner Earnings = OCF − D&A
From Buffett's 1986 Berkshire annual letter. Owner Earnings is the cash a business produces after spending what is necessary to maintain its current productive capacity. We use depreciation & amortization as the proxy for that maintenance reinvestment — “vaguely right rather than precisely wrong.”
| Operating Cash Flow (latest annual) | $9.29B |
| Depreciation & Amortization | $2.46B |
| Fiscal period end | Owner Earnings | Note |
|---|---|---|
| 2025-12-31 | $6.83B | ← median (used as headline OE) |
| 2024-12-31 | $6.95B | |
| 2023-12-31 | $6.06B |
Spec (Stage 1) smooths Owner Earnings via the median of the last three annual filings. The median trims outliers symmetrically — a single bad year or a single working-capital swing no longer dominates. If the median itself comes out non-positive, that flows through to the IV honestly (no rescue to a best-positive year).
| Owner Earnings (smoothed, headline) | $6.83B |
Growth — analyst consensus, capped, then faded to GDP
G1 is the simple average of the year-over-year EPS growth rates we can compute from the available forward analyst consensus — up to five years out from the latest actual, fewer when fewer estimates are on file — capped at 20% and floored at 0%. G2 is forecasted U.S. real GDP growth — no business compounds faster than the overall economy forever. Between them, growth fades linearly.
| From → To | EPS | → EPS | YoY growth |
|---|---|---|---|
| 2025 → 2026 | 11.97 | 13.07 | +9.2% |
| 2026 → 2027 | 13.07 | 14.17 | +8.4% |
| 2027 → 2028 | 14.17 | 15.69 | +10.7% |
| 2028 → 2029 | 15.69 | 18.30 | +16.7% |
| 2029 → 2030 | 18.30 | 20.24 | +10.6% |
| G1 mean (5-yr available forward chain) | 11.1% |
| G1 median (sanity check) | 10.6% |
| G1 cap / floor | 0% / 20% |
| G1 (clipped) | 11.1% |
| G2 (forecasted U.S. real GDP) | 2.3% |
Projected Owner Earnings, years 1–11
Apply the linear-fade growth schedule to Owner Earnings. Year 11 exists only as the input to the terminal value formula in step V — it is not summed.
| Year | Growth applied | Projected OE | Discount factor | Present value |
|---|---|---|---|---|
| +1 | 11.11% | $7.58B | 0.953 | $7.23B |
| +2 | 10.23% | $8.36B | 0.908 | $7.59B |
| +3 | 9.35% | $9.14B | 0.865 | $7.91B |
| +4 | 8.46% | $9.91B | 0.824 | $8.17B |
| +5 | 7.58% | $10.67B | 0.785 | $8.38B |
| +6 | 6.70% | $11.38B | 0.748 | $8.52B |
| +7 | 5.81% | $12.04B | 0.713 | $8.59B |
| +8 | 4.93% | $12.63B | 0.679 | $8.58B |
| +9 | 4.04% | $13.15B | 0.647 | $8.51B |
| +10 | 3.16% | $13.56B | 0.617 | $8.36B |
| +11 (TV input) | 2.28% | $13.87B | 0.588 | — |
Discount rate — 10-year Treasury
The discount rate is the required rate of return — the minimum we demand to justify owning this business instead of a risk-free Treasury bond. Buffett anchors here for a reason: if a stock can't generate returns above the risk-free rate after accounting for its uncertainty, it is not an attractive investment.
| 10-year U.S. Treasury yield | 4.95% |
| Risk premium added | 0.00% |
| Discount rate (r) | 4.95% |
10Y Treasury 4.95%
Terminal value — perpetuity beyond year 10
No business stops generating cash after a decade. The terminal value captures the value of all cash flows from year 11 forward, modeled as a perpetuity growing at G2. This is typically the largest single component of intrinsic value.
| Year 11 Owner Earnings | $13.87B |
| g₂ used (with r − 0.5pp guard) | 2.3% |
| Future value of terminal = Y11 OE / (r − g₂) | $518.69B |
| Discount factor at year 10 | 1 / (1 + r)¹⁰ = 0.617 |
| Present value of terminal | $319.95B |
Intrinsic value per share
Sum the present value of all projected Owner Earnings (years 1–10) plus the present value of the terminal value. Divide by fully diluted shares outstanding.
| PV sum, years 1–10 | $81.83B |
| PV of terminal value | $319.95B |
| Total intrinsic value | $401.78B |
| Shares used (diluted weighted-average) | $593.5M |
| Intrinsic value per share | $676.97 |
Margin of safety
Intrinsic value is an estimate, not a fact. The margin of safety is the buffer that protects against being wrong. Default 25%; raise it for lower-quality businesses or higher-uncertainty situations.
| Intrinsic value per share | $676.97 |
| Margin of safety (rate) | 25% |
| Buy price (IV × (1 − MoS)) | $507.73 |
UNP — Union Pacific Corporation
| Symbol | UNP |
| Mr. Market’s asking price | $284.28 |
| Intrinsic value (with 25% MoS) | $507.73 |
| Δ% vs current price | +138.1% |
| Operating Cash Flow (latest annual) | $9.29B |
| G1 / G2 | 11.1% / 2.3% |
| Mr. Market’s mood | DEPRESSED |
| Final verdict | OFFERED BELOW VALUE |
Mr. Market DiagnosticsBuffett-style screens (not in canonical protocol)Two supplementary checks we keep around but do not use to drive the BUY signal: an 8-dimension business-durability screen, and Buffett's 2010 Two-Column cross-check. Click to expand.
[ Expand ]
Two supplementary checks we keep around but do not use to drive the BUY signal: an 8-dimension business-durability screen, and Buffett's 2010 Two-Column cross-check. Click to expand.
Score: 75 / 100
| Check | Threshold | Observed | Verdict |
|---|---|---|---|
| ≥5 years of financial history (free-tier window) | >= 5 | 10 | ✓ |
| Positive net income every year of last 5 | 5 / 5 | 5 / 5 | ✓ |
| FCF (CFO − CapEx) positive in all of last 5 years | 5 / 5 | 5 / 5 | ✓ |
| Operating-margin coefficient of variation ≤ 0.15 | ≤ 0.15 | 0.05 | ✓ |
| EPS predictability R² ≥ 0.80 (5-yr trend fit) | >= 0.80 | 0.65 | ✗ |
Implied IV: $119.72
| Column A (cash + securities − debt) per share | -$46.06 |
| Sector multiple used | 10× pre-tax operating income |
| Column B (operating EPS × multiple) | $165.78 |
| Two-Column IV per share | $119.72 |
The Sources
Every number above traces back to a specific external source. Company fundamentals (cash flow, income statement, balance sheet) come from the company's own SEC filings, fetched through Financial Modeling Prep's normalized GAAP schema. The 10-year and 30-year U.S. Treasury yields come from FMP's daily Treasury constant-maturity series. Analyst-consensus EPS estimates come from FMP. The terminal growth rate G2 is computed from the Federal Reserve's FRED real-GDP series (GDPC1), trailing-4-quarter YoY-YoY, with a Supabase-backed last-known-good fallback if FRED is temporarily unreachable. The raw inputs follow.
Cash flow (most recent)
| Net income | $7.14B |
| Operating cash flow | $9.29B |
| Depreciation & amortization | $2.46B |
| Stock-based comp | $0 |
| Capital expenditure | -$3.79B |
| Free cash flow | $5.50B |
| Filing date | 2026-02-06 |
Forward analyst EPS estimates
| Year | EPS Avg | Low | High | Analysts |
|---|---|---|---|---|
| 2021 | 9.88 | 9.55 | 10.20 | 8 |
| 2022 | 11.41 | 11.02 | 11.77 | 12 |
| 2023 | 10.29 | 10.12 | 10.46 | 18 |
| 2024 | 10.96 | 10.94 | 11.00 | 16 |
| 2025 | 11.69 | 11.60 | 11.90 | 10 |
| 2026 | 13.07 | 12.78 | 13.20 | 16 |
| 2027 | 14.17 | 13.49 | 14.38 | 16 |
| 2028 | 15.69 | 15.01 | 16.22 | 6 |
| 2029 | 18.30 | 17.79 | 18.78 | 3 |
| 2030 | 20.24 | 19.67 | 20.77 | 2 |