Let's talk about the popular Penske Automotive Group, Inc. (NYSE:PAG). The company's shares saw significant share price movement during recent months on the NYSE, rising to highs of US$167 and falling to the lows of US$142. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Penske Automotive Group's current trading price of US$151 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Penske Automotive Group's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Penske Automotive Group
Is Penske Automotive Group Still Cheap?
According to our valuation model, Penske Automotive Group seems to be fairly priced at around 0.1% below our intrinsic value, which means if you buy Penske Automotive Group today, you'd be paying a fair price for it. And if you believe the company's true value is $150.74, then there's not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Penske Automotive Group's share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Penske Automotive Group?
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 negative earnings growth of -15%, which doesn't help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What This Means For You
Are you a shareholder? Currently, PAG appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you've been keeping an eye on PAG for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there's less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven't considered today, which can help crystalize your views on PAG should the price fluctuate below its true value.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Our analysis shows 4 warning signs for Penske Automotive Group (1 doesn't sit too well with us!) and we strongly recommend you look at these before investing.
If you are no longer interested in Penske Automotive Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.