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Are Investors Undervaluing Paccar (PCAR) Right Now?

Synopsys (SNPS) delivered earnings and revenue surprises of 6.42% and 1.10%, respectively, for the quarter ended April 2019. Do the numbers hold clues to what lies ahead for the stock?

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One company to watch right now is Paccar (PCAR). PCAR is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock has a Forward P/E ratio of 9.84. This compares to its industry's average Forward P/E of 11.06. Over the past year, PCAR's Forward P/E has been as high as 17.87 and as low as 8.90, with a median of 11.43.

Investors will also notice that PCAR has a PEG ratio of 0.91. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. PCAR's industry currently sports an average PEG of 1.51. Over the past 52 weeks, PCAR's PEG has been as high as 1.79 and as low as 0.82, with a median of 1.15.

Another valuation metric that we should highlight is PCAR's P/B ratio of 2.34. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 2.56. Over the past year, PCAR's P/B has been as high as 3.45 and as low as 2.10, with a median of 2.70.

Finally, we should also recognize that PCAR has a P/CF ratio of 6.54. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 6.82. PCAR's P/CF has been as high as 11.90 and as low as 5.86, with a median of 7.64, all within the past year.

These are just a handful of the figures considered in Paccar's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that PCAR is an impressive value stock right now.


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