At US$152, Is It Time To Put Penske Automotive Group, Inc. (NYSE:PAG) On Your Watch List?

Penske Automotive Group, Inc. (NYSE:PAG) saw significant share price movement during recent months on the NYSE, rising to highs of US$175 and falling to the lows of US$142. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Penske Automotive Group's current trading price of US$152 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Penske Automotive Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Penske Automotive Group

Is Penske Automotive Group Still Cheap?

According to my valuation model, Penske Automotive Group seems to be fairly priced at around 2.6% below my intrinsic value, which means if you buy Penske Automotive Group today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $156.00, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Penske Automotive Group’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Penske Automotive Group?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a negative profit growth of -15% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Penske Automotive Group. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? PAG seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on PAG for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on PAG should the price fluctuate below its true value.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. When we did our research, we found 4 warning signs for Penske Automotive Group (1 can't be ignored!) that we believe deserve your full attention.

If you are no longer interested in Penske Automotive Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.