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Is Penske Automotive Group, Inc. (NYSE:PAG) Potentially Undervalued?

Simply Wall St

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Penske Automotive Group, Inc. (NYSE:PAG), which is in the specialty retail business, and is based in United States, saw a decent share price growth in the teens level on the NYSE over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at Penske Automotive Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Penske Automotive Group

What's the opportunity in Penske Automotive Group?

Good news, investors! Penske Automotive Group is still a bargain right now. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Penske Automotive Group’s ratio of 8.64x is below its peer average of 14.94x, which suggests the stock is undervalued compared to the Specialty Retail industry. Although, there may be another chance to buy again 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.

Can we expect growth from Penske Automotive Group?

NYSE:PAG Past and Future Earnings, June 24th 2019

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of Penske Automotive Group, it is expected to deliver a relatively unexciting earnings growth of 0.05%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for Penske Automotive Group, at least in the near term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since PAG is currently undervalued, it may be a great time to increase your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on PAG for a while, now might be the time to make a leap. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy PAG. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Penske Automotive Group. You can find everything you need to know about Penske Automotive Group in the latest infographic research report. If you are no longer interested in Penske Automotive Group, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.