Paccar (PCAR) is a company that produces large commercial trucks through its subsidiaries, namely DAF, Kenworth, and Peterbilt, catering to markets worldwide. Amidst the recovering economy, the demand for trucks in the United States has also increased. This has resulted in PCAR posting strong performance in 2023, with PCAR shares recording a remarkable +41% increase over the past year. Here is our analysis of why PCAR stock is attractive and the prospects for investment at present.
1. Rapid Growth in Revenue and Net Profit
In 3Q 2023, PCAR reported a revenue increase from $19.58 billion in 3Q 2022 to $24.72 billion, marking a 26.27% year-on-year growth. The Earnings Per Share (EPS) of PCAR also increased by 52.13%, rising from $3.99 to $6.07 during the same period. Since 2021, PCAR's revenue has been growing at an average rate of 24.05% per year, and EPS has increased by an average of 52.27% per year. PCAR has successfully recovered from the COVID-19 crisis in 2020, achieving its highest revenue and net profit to date. Additionally, PCAR maintains a reasonable debt ratio with a Debt-to-Equity Ratio (DER) of 0.91 and boasts a commendable 18.7% Return on Equity (ROE).
2. Reasonably Low Valuation
At a price of $94.6 per share, PCAR has a Price-to-Earnings (P/E) ratio of 16.4 and a Price-to-Book Value (PBV) of 3.1. However, with the projected increase in EPS in 2023, PCAR shares have the potential to be valued at a forward P/E of 12.5. This value is significantly low compared to its net profit and EPS growth, positioning PCAR as one of the undervalued stocks currently. The combination of rapid growth performance and low valuation has contributed to a +41% increase in PCAR shares over the past year.
Conclusion
PCAR stock is one of the companies experiencing a recovery after the COVID-19 crisis. The business performance of PCAR continues to grow rapidly in tandem with the economic recovery in the United States. The combination of low valuation and well-controlled debt ratios makes this stock attractive, presenting PCAR as an appealing investment prospect at this time.
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