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If You Invested $1000 in Penske Automotive 10 Years Ago, This Is How Much You'd Have Now

·4 min read

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 thing that can drive investing is the fear of missing out, or FOMO. This particularly applies to 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. 

Bottom Line

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.

A $1000 investment made in July 2011 would be worth $3,417.09, or a gain of 241.71%, as of July 21, 2021, according to our calculations. This return excludes dividends but includes price appreciation.

Compare this to the S&P 500's rally of 226.06% and gold's return of 9.40% over the same time frame.

Analysts are forecasting more upside for PAG too.

Penske's diversified business segments which include heavy duty truck retailing/leasing bode well. The firm 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 expand Penske’s Premier Truck Group arm’s scale and bolster top line growth. The firm's investor friendly moves as well increasing digital capabilities and cost cut efforts are also praiseworthy. However, coronavirus scare and global chip shortage may weigh on the near term prospects of the auto retailer. Also, rising competition and increasing price transparency can lead to lower selling prices, thus affecting Penske’s profitability. High debt levels and unfavorable currency fluctuations are other headwinds. As such, the stock warrants a cautious stance.

The stock is up 7.47% over the past four weeks, and no earnings estimate has gone lower in the past two months, compared to 3 higher, for fiscal 2021. The consensus estimate has moved up as well.
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