Penske Automotive Seems to be Relatively Valued

At the existing value around $60 per share, we believe that Penske Automotive Group Inc’s inventory (NYSE: PAG) has achieved its close to phrase potential. PAG inventory has risen 20% given that the conclude of 2019 in contrast to the S&P 500 which has greater by 16% in the very same period of time. Penske noticed revenue fall by 15% in the to start with 3 quarters of 2020. For Q3 2020 revenues were being flat when earnings improved to $3.07 in contrast to $1.42 in the exact period of the prior calendar year mostly thanks to lower working expenses. The business has viewed earnings slide over the latest years, while its P/E numerous has been climbing. We think the stock has reached its around time period possible. Our dashboard ’Obtain or Provide Penske Automotive Team Stock’ delivers the essential quantities powering our pondering.

Penske Automotive Group’s earnings rose from $22.8 billion in 2018 to $23.2 billion in 2019. Internet Revenue margin fell from 2.1% in 2018 to 1.9% in 2019. On a for each share foundation, earnings went down from $5.52 to $5.28 offset by a 3% lower in shares remarkable.

For the duration of the exact same period of time, the P/E numerous rose, as it grew from 7.3x to 9.5x. The P/E improved in 2020 and is at the moment at 11.5x.

Where by Is The Stock Headed?

The international distribute of coronavirus led to lockdown in several towns throughout the world, which afflicted industrial and financial activity. This is possible to adversely have an affect on use and client expending. Penske Automotive Group’s revenues and earnings fell in the to start with nine months of 2020. Earnings had been marginally increased as the organization continues its concentration on reducing expenditure, having removed $125-150 million of annualized expenditure across several segments. As for every the Chairman after Q3 effects, stronger income circulation has permitted the enterprise to cut down lengthy-term credit card debt, lengthen maturities, and reduce foreseeable future once-a-year fascination price by an approximated $17 million.

The real restoration and its timing hinge on the broader containment of the coronavirus unfold. Our dashboard Trends In U.S. Covid-19 Instances gives an overview of how the pandemic has been spreading in the U.S. and contrasts with tendencies in Brazil and Russia. Pursuing the Fed stimulus — which established a flooring on concern — the market has been ready to “look through” the latest weak time period and choose a more time-phrase watch, focusing their awareness on FY 2022 benefits. Although marketplace sentiment can be fickle, and evidence of an uptick in new cases could spook buyers once yet again.

Even though Penske Automotive Team inventory may perhaps have risen, 2020 has produced lots of pricing discontinuities which can offer interesting trading chances. For case in point, you’ll be amazed how counter-intuitive the stock valuation is for Basic Motors vs Comcast.


See all Trefis Cost Estimates and Download Trefis Knowledge here

What’s driving Trefis? See How It’s Powering New Collaboration and What-Ifs For CFOs and Finance GroupsMerchandise, R&D, and Promoting Teams

Share This Post