2024-04-02 01:51:58 ET
Summary
- Penske Automotive Group has underperformed in recent months, with shares down 9.4% while the S&P 500 is up 15%.
- Despite the underperformance, the stock has become even cheaper and offers potential upside for investors.
- The company's revenue grew 6.4% in the fiscal year, with growth across all sales lines, but net income dropped from $1.38 billion to $1.05 billion.
- Despite this bottom line pain, shares look attractively priced and should fare well moving forward.
Over the past couple of years, I have been particularly interested in a few key markets. One of these has been the automotive retail space. It is a highly fragmented industry and some of the players in it have achieved rather attractive results by means of consolidation. And because of concerns about the economy more broadly, and particularly about interest rates and inflation, many of the companies in this market have traded at low multiples. One firm that I have been fairly bullish on in this space but that has unfortunately underperformed in recent months is Penske Automotive Group ( PAG ). For those not aware, the multibillion dollar firm operates 336 retail automotive franchised dealerships. The company also has a couple of other operations, including one that acts as an importer and distributor of heavy duty trucks in Australia, and another unit called Penske Transportation Solutions that holds its 28.9% ownership interest in Penske Truck Leasing Co....
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Penske Automotive Group: Despite Bottom Line Pain, Shares Look Attractively Priced