Have you been paying attention to shares of
Penske Automotive (? Shares have been on the move with the stock up 10.1% over the past month. The stock hit a new 52-week high of $121.18 in the previous session. Penske Automotive has gained 12.1% since the start of the year compared to the -43% move for the Zacks Retail-Wholesale sector and the 3.2% return for the Zacks Automotive - Retail and Whole Sales industry. PAG Quick Quote PAG - Free Report) What's Driving the Outperformance?
The stock has a great 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 $16.81 per share on $28.31 billion in revenues. This represents a 10.01% change in EPS on a 10.77% change in revenues. For the next fiscal year, the company is expected to earn $14.67 per share on $29.28 billion in revenues. This represents a year-over-year change of -12.68% and 3.44%, respectively.
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 has run ahead of itself.
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. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
Penske has a Value Score of A. The stock's Growth and Momentum Scores are B and D, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 7.2X current fiscal year EPS estimates, which is a premium to the peer industry average of 6.4X. On a trailing cash flow basis, the stock currently trades at 8.5X versus its peer group's average of 7X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Penske currently has a Zacks Rank of #2 (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 passes the test. Thus, it seems as though Penske shares could have a bit more room to run in the near term.
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
Titan Machinery Inc. (. TITN has a Zacks Rank of # 2 (Buy) and a Value Score of A, a Growth Score of A, and a Momentum Score of A. TITN Quick Quote TITN - Free Report)
Earnings were strong last quarter. Titan Machinery Inc. beat our consensus estimate by 54.90%, and for the current fiscal year, TITN is expected to post earnings of $2.96 per share on revenue of $2.02 billion.
Shares of Titan Machinery Inc. have gained 19.4% over the past month, and currently trade at a forward P/E of 9.37X and a P/CF of 6.99X.
The Automotive - Retail and Whole Sales industry is in the top 8% of all the industries we have in our universe, so it looks like there are some nice tailwinds for PAG and TITN, even beyond their own solid fundamental situation.