It looks like the third quarter was just a little bump in the road for the not-so-little engine that could. Canadian National (NYSE:CNI) continues to get the job done in notable fashion, and the fourth quarter was another strong performance.

Revenue rose 9%, due largely to single-digit rate increases and fuel surcharges. Actual volume for the quarter, as measured by carloads and revenue ton miles, was down 3% and 1%, respectively. Coal in particular was a little weak from this perspective; carloads dropped 11% and revenue ton miles fell by 10%. Forest products, metals and minerals, and intermodal were areas of relative strength.

I've lauded this company's operating efficiency in the past, and this quarter is no exception. Operating income rose 19% in the quarter, and the operating ratio improved to 61.8 -- another great performance when compared to solid American operators like BurlingtonNorthern Santa Fe (NYSE:BNI) and Norfolk Southern (NYSE:NSC). In fact, were you to subtract the higher fuel costs in the quarter, the company would have actually lowered its operating expenses on a year-over-year basis.

As much as I like Canadian National, I've been skeptical on the stock for about a quarter now. That skepticism has cost me, since the stock jumped about another 18% during the fourth quarter. It's a pretty basic conundrum for a value investor -- do you bow to the whims of the market and acknowledge that these are very strong times for the railroads, or do you maintain a valuation approach that has worked for you in the past?

More often that not, I try to take a middle ground -- buying only when stocks look cheap, but not selling simply because they look expensive. In other words, I'm a firm believer in letting your winners run, but not chasing after stocks that you don't already own. With that said, I'll continue to watch Canadian National from the sidelines -- it won't surprise me much to see the stock head higher, even though I think some investors have gotten a bit derailed with their future growth projections.

For more Foolishness on the iron horses:

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).