Is PACCAR (PCAR) Stock Undervalued Right Now?
Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. 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 PACCAR (PCAR). PCAR is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value.
Investors will also notice that PCAR has a PEG ratio of 1.15. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. PCAR's PEG compares to its industry's average PEG of 3.23. Over the past 52 weeks, PCAR's PEG has been as high as 1.81 and as low as 1.04, with a median of 1.26.
Another valuation metric that we should highlight is PCAR's P/B ratio of 2.52. 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 stock's P/B looks solid versus its industry's average P/B of 6.31. PCAR's P/B has been as high as 2.93 and as low as 2.20, with a median of 2.56, over the past year.
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. PCAR has a P/S ratio of 1.24. This compares to its industry's average P/S of 3.03.
Finally, our model also underscores that PCAR has a P/CF ratio of 10.52. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 19.25. PCAR's P/CF has been as high as 12.21 and as low as 9.15, with a median of 10.72, all within the past year.
These figures are just a handful of the metrics value investors tend to look at, but they help show that PACCAR is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, PCAR feels like a great value stock at the moment.
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