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Shares of Penske Automotive Group (PAG) have been strong performers lately, with the stock up 11.7% over the past month. The stock hit a new 52-week high of $95.69 in the previous session. Penske Automotive Group has gained 59.7% since the start of the year compared to the -3.8% move for the Zacks Retail-Wholesale sector and the 35.5% return for the Zacks Automotive - Retail and Whole Sales industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on July 28, 2021, Penske reported EPS of $4.47 versus consensus estimate of $3.99.
For the current fiscal year, Penske is expected to post earnings of $13.1 per share on $25.9 billion in revenues. This represents a 97.29% change in EPS on a 26.7% change in revenues. For the next fiscal year, the company is expected to earn $10.93 per share on $27.26 billion in revenues. This represents a year-over-year change of -16.55% and 5.23%, respectively.
Penske may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Penske has a Value Score of A. The stock's Growth and Momentum Scores are A and C, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 7.2X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 11.7X versus its peer group's average of 8.7X. Additionally, the stock has a PEG ratio of 0.76. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Penske currently has a Zacks Rank of #1 (Strong Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Penske meets the list of requirements. Thus, it seems as though Penske shares could have potential in the weeks and months to come.
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Penske Automotive Group, Inc. (PAG) : Free Stock Analysis Report
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