What Is Penske Automotive Group, Inc.'s (NYSE:PAG) Share Price Doing?

By
Simply Wall St
Published
February 16, 2022
NYSE:PAG
Source: Shutterstock

While Penske Automotive Group, Inc. (NYSE:PAG) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the NYSE, rising to highs of US$112 and falling to the lows of US$95.87. 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$100 reflective of the actual value of the mid-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?

According to my valuation model, Penske Automotive Group seems to be fairly priced at around 12% 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 the company’s true value is $114.55, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Penske Automotive Group’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Penske Automotive Group generate?

earnings-and-revenue-growth
NYSE:PAG Earnings and Revenue Growth February 16th 2022

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 -7.0% 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 de-risk your portfolio. Is your current exposure to the stock optimal 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 advantageous 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. Furthermore, 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 crystalize your views on PAG should the price fluctuate below its true value.

So while earnings quality is important, it's equally important to consider the risks facing Penske Automotive Group at this point in time. To that end, you should learn about the 3 warning signs we've spotted with Penske Automotive Group (including 1 which doesn't sit too well with us).

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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