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Are Investors Undervaluing Penske Automotive (PAG) Right Now?

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to...

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This story originally appeared on Zacks

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

- Zacks

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One stock to keep an eye on is Penske Automotive (PAG). PAG is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A.

We should also highlight that PAG has a P/B ratio of 2.26. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. PAG's current P/B looks attractive when compared to its industry's average P/B of 2.49. Over the past year, PAG's P/B has been as high as 2.43 and as low as 1.33, with a median of 1.83.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. PAG has a P/S ratio of 0.33. This compares to its industry's average P/S of 0.41.

Finally, investors will want to recognize that PAG has a P/CF ratio of 7.86. 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. PAG's current P/CF looks attractive when compared to its industry's average P/CF of 10.43. Over the past 52 weeks, PAG's P/CF has been as high as 10.37 and as low as 5.61, with a median of 8.01.

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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