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Penske Automotive Group, Inc. (PAG) Soars to 52-Week High, Time to Cash Out?

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Have you been paying attention to shares of Penske Automotive (PAG - Free Report) ? Shares have been on the move with the stock up 20.1% over the past month. The stock hit a new 52-week high of $116.72 in the previous session. Penske Automotive has gained 8.1% since the start of the year compared to the -23.4% move for the Zacks Retail-Wholesale sector and the 0.8% return for the Zacks Automotive - Retail and Whole Sales industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on April 27, 2022, Penske reported EPS of $4.76 versus consensus estimate of $3.94 while it beat the consensus revenue estimate by 11.48%.

For the current fiscal year, Penske is expected to post earnings of $15.79 per share on $26.49 billion in revenues. This represents a 3.34% change in EPS on a 3.64% change in revenues. For the next fiscal year, the company is expected to earn $13.83 per share on $26.44 billion in revenues. This represents a year-over-year change of -12.41% and -0.16%, respectively.

Valuation Metrics

Penske may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Penske has a Value Score of B. The stock's Growth and Momentum Scores are C and D, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 7.3X current fiscal year EPS estimates, which is a premium to the peer industry average of 6.9X. On a trailing cash flow basis, the stock currently trades at 8.2X versus its peer group's average of 6.3X. Additionally, the stock has a PEG ratio of 3.78. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Penske currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Penske fits the bill. Thus, it seems as though Penske shares could have potential in the weeks and months to come.

How Does PAG Stack Up to the Competition?

Shares of PAG have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is AutoNation, Inc. (AN - Free Report) . AN has a Zacks Rank of # 1 (Strong Buy) and a Value Score of A, a Growth Score of A, and a Momentum Score of F.

Earnings were strong last quarter. AutoNation, Inc. beat our consensus estimate by 7.24%, and for the current fiscal year, AN is expected to post earnings of $22.02 per share on revenue of $27.51 billion.

Shares of AutoNation, Inc. have gained 21.9% over the past month, and currently trade at a forward P/E of 5.62X and a P/CF of 5.2X.

The Automotive - Retail and Whole Sales industry is in the top 9% of all the industries we have in our universe, so it looks like there are some nice tailwinds for PAG and AN, even beyond their own solid fundamental situation.


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