Should You Think About Buying Penske Automotive Group, Inc. (NYSE:PAG) Now?

Penske Automotive Group, Inc. (NYSE:PAG) saw significant share price movement during recent months on the NYSE, rising to highs of US$170 and falling to the lows of US$151. 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$157 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

What Is Penske Automotive Group Worth?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 3.70% above our intrinsic value, which means if you buy Penske Automotive Group today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is $151.76, then there isn’t really any room for the share price grow beyond what it’s currently trading. 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.

What kind of growth will Penske Automotive Group generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 relatively muted profit growth of 8.4% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Penske Automotive Group, at least in the short term.

What This Means For You

Are you a shareholder? PAG’s future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on PAG, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Penske Automotive Group at this point in time. To help with this, we've discovered 2 warning signs (1 doesn't sit too well with us!) that you ought to be aware of before buying any shares in Penske Automotive Group.

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.