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Are Investors Undervaluing Penske Automotive (PAG) Right Now?
Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.
Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.
One stock to keep an eye on is Penske Automotive (PAG - Free Report) . PAG is currently sporting a Zacks Rank of #1 (Strong Buy), as well as an A grade for Value.
Investors should also recognize that PAG has a P/B ratio of 1.90. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. PAG's current P/B looks attractive when compared to its industry's average P/B of 2.33. PAG's P/B has been as high as 2.15 and as low as 1.24, with a median of 1.63, over the past year.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. PAG has a P/S ratio of 0.29. This compares to its industry's average P/S of 0.41.
Finally, our model also underscores that PAG has a P/CF ratio of 6.60. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 9.52. PAG's P/CF has been as high as 10.37 and as low as 5.61, with a median of 8.15, all within the past year.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Penske Automotive is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, PAG feels like a great value stock at the moment.