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How much a stock's price changes over time is important for most investors, since price performance can both impact your investment portfolio and help you compare investment results across sectors and industries.
Another factor that can influence investors is FOMO, or the fear of missing out, especially with tech giants and popular consumer-facing stocks.
What if you'd invested in Penske Automotive (PAG) ten years ago? It may not have been easy to hold on to PAG for all that time, but if you did, how much would your investment be worth today?
Penske Automotive's Business In-Depth
With that in mind, let's take a look at Penske Automotive's main business drivers.
Established in 1990, Penske Automotive Group, Inc., based in Bloomfield Hills, MI, engages in the operation of automotive and commercial truck dealerships in the United States, Canada and Western Europe. The company also distributes commercial vehicles, diesel engines, gas engines, power systems and related parts and services principally in Australia and New Zealand. It employs more than 27,000 people across the globe.
The company also offers higher margin products such as finance, insurance and vehicle service contracts; maintenance repair services; replacement parts and aftermarket automotive products.
The company operates under three reportable segments, Retail Automotive, Commercial Truck and Commercial Vehicles Australia/Power Systems.
Retail Automotive which deals with retail automotive dealership operations generated 87.9% of revenues in 2020. Per the company, it is the second largest automotive retailer headquartered in the United States.
Commercial Truck, which consists of the U.S. retail commercial truck dealership operations generated 9.9% of the revenues in 2020. The company operates a heavy and medium-duty truck dealership group known as Premier Truck Group (PTG) with locations in Texas, Oklahoma, Tennessee, Georgia, and Canada.
Commercial Vehicles Australia/Power Systems and Other generated 2.2% of the revenues in 2020. The company is the exclusive importer and distributor of Western Star heavy-duty trucks (a Daimler brand), MAN heavy and medium-duty trucks and buses (a VW Group brand), and Dennis Eagle refuse collection vehicles.
In 2020, its retail automotive brand mix consisted of 73% Premium, 21% Volume non-U.S., 5% Used-Vehicle Stand-Alone and 1% the U.S. big-three.
Of late, the company has been expanding its presence in the U.K., its second largest market, with an aim to capitalize on the highly fragmented used automotive retail segment and reinforce its position in the country.
Putting together a successful investment portfolio takes a combination of research, patience, and a little bit of risk. For Penske Automotive, if you bought shares a decade ago, you're likely feeling really good about your investment today.
According to our calculations, a $1000 investment made in August 2011 would be worth $5,092.80, or a gain of 409.28%, as of August 24, 2021, and this return excludes dividends but includes price increases.
In comparison, the S&P 500 gained 285.39% and the price of gold went up -1.70% over the same time frame.
Going forward, analysts are expecting more upside for PAG.
Penske has become the largest dealership group for Freightliner in North America with the acquisition of Warner Truck Centers. Buyout of Kansas City Freightliner is set to fuel Penske's prospects further. Penske Transportation Solutions (PTS) joint venture has also been boosting the prospects of Penske Automotive— which holds 28.9% in PTS. Acquisition of Black Horse Carriers—completed early this year— is expected to add at least $600 million in revenue for PTS in 2021. CarShop expansion will further fuel the top-line growth of the firm. Investor-friendly moves of Penske further instill optimism. So far in 2021, the company has hiked its quarterly dividend thrice. In July, Penske boosted its share buyback authorization to $250 million. Given the tailwinds, Penske is currently viewed as an attractive bet.
Shares have gained 6.33% over the past four weeks and there have been 5 higher earnings estimate revisions for fiscal 2021 compared to none lower. The consensus estimate has moved up as well.
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