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Is Penske Automotive (PAG) a Great Value Stock Right Now?

Zacks Equity Research
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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.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

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 value investors might notice is Penske Automotive (PAG). PAG is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock holds a P/E ratio of 8.35, while its industry has an average P/E of 8.41. Over the last 12 months, PAG's Forward P/E has been as high as 11.58 and as low as 7, with a median of 9.04.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. PAG has a P/S ratio of 0.17. This compares to its industry's average P/S of 0.2.

Finally, our model also underscores that PAG has a P/CF ratio of 4.92. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 5.20. PAG's P/CF has been as high as 6.61 and as low as 4.09, with a median of 5.45, all within the past year.

These are just a handful of the figures considered in Penske Automotive'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 PAG is an impressive value stock right now.


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