Paccar Inc Valuation – March 2019 #PCAR

Company Profile (excerpt from Reuters): PACCAR Inc (PACCAR), incorporated on November 19, 1971, is a technology company. The Company’s segments include Truck, Parts and Financial Services. The Truck segment includes the design, manufacture and distribution of light-, medium- and heavy-duty commercial trucks. The Parts segment includes the distribution of aftermarket parts for trucks and related commercial vehicles. The Financial Services segment includes finance and leasing products and services provided to customers and dealers. Its Other business includes the manufacturing and marketing of industrial winches. The Company operates in Australia and Brazil and sells trucks and parts to customers in Asia, Africa, the Middle East and South America.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PCAR – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $23,413,866,116 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.42 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 134.99% Pass
6. Moderate PEmg Ratio PEmg < 20 13.21 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.75 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.42 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.63 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.11
MG Growth Estimate 5.24%
MG Value $97.02
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $74.12
MG Value based on 0% Growth $43.45
Market Implied Growth Rate 2.36%
Current Price $67.54
% of Intrinsic Value 69.62%

PACCAR Inc qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position. . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.79 in 2015 to an estimated $5.11 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.36% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into PACCAR Inc revealed the company was trading above its Graham Number of $57.85. The company pays a dividend of $1.09 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 13.21, which was below the industry average of 22.49, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $3.64.

PACCAR Inc performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $3.64
Graham Number $57.85
PEmg 13.21
Current Ratio 2.42
PB Ratio 2.75
Current Dividend $1.09
Dividend Yield 1.61%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $18,160,900,000
Total Current Liabilities $7,502,800,000
Long-Term Debt $6,693,700,000
Total Assets $25,482,400,000
Intangible Assets $0
Total Liabilities $16,889,500,000
Shares Outstanding (Diluted Average) 349,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.00
Dec2018 $6.24
Dec2017 $4.75
Dec2016 $1.48
Dec2015 $4.51
Dec2014 $3.82
Dec2013 $3.30
Dec2012 $3.12
Dec2011 $2.86
Dec2010 $1.25
Dec2009 $0.31
Dec2008 $2.78
Dec2007 $3.29
Dec2006 $3.97
Dec2005 $2.91
Dec2004 $2.29
Dec2003 $1.33
Dec2002 $0.95
Dec2001 $0.44
Dec2000 $1.13
Dec1999 $1.46

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.11
Dec2018 $4.50
Dec2017 $3.61
Dec2016 $3.11
Dec2015 $3.79
Dec2014 $3.24
Dec2013 $2.69
Dec2012 $2.28
Dec2011 $1.94
Dec2010 $1.76
Dec2009 $2.23
Dec2008 $3.14
Dec2007 $3.13
Dec2006 $2.80
Dec2005 $2.00
Dec2004 $1.44
Dec2003 $1.03

Recommended Reading:

Other ModernGraham posts about the company

Paccar Inc Valuation – May 2018 $PCAR
PACCAR Inc Valuation – February 2017 $PCAR
15 Best Undervalued Stocks of the Week – 8/20/16
PACCAR Inc Valuation – August 2016 $PCAR
10 Most Undervalued Companies for the Defensive Investor – July 2016

Other ModernGraham posts about related companies

BorgWarner Inc Valuation – February 2019 $BWA
CarMax Inc Valuation – February 2019 $KMX
Ford Motor Co Valuation – February 2019 $F
General Motors Co Valuation – February 2019 $GM
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Goodyear Tire & Rubber Co Valuation – January 2019 $GT
Genuine Parts Co Valuation – January 2019 $GPC
Autozone Inc Valuation – January 2019 $AZO
Linamar Corp Valuation – October 2018 $TSE-LNR
AutoNation Inc Valuation – September 2018 $AN

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Paccar Inc Valuation – May 2018 $PCAR

Company Profile (excerpt from Reuters): PACCAR Inc (PACCAR), incorporated on November 19, 1971, is a technology company. The Company’s segments include Truck, Parts and Financial Services. The Truck segment includes the design, manufacture and distribution of light-, medium- and heavy-duty commercial trucks. The Parts segment includes the distribution of aftermarket parts for trucks and related commercial vehicles. The Financial Services segment includes finance and leasing products and services provided to customers and dealers. Its Other business includes the manufacturing and marketing of industrial winches. The Company operates in Australia and Brazil and sells trucks and parts to customers in Asia, Africa, the Middle East and South America.

PCAR Chart

PCAR data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PCAR – May 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $22,234,207,124 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.45 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 159.28% Pass
6. Moderate PEmg Ratio PEmg < 20 15.17 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.61 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.45 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.60 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.16
MG Growth Estimate 4.26%
MG Value $70.81
Opinion Fairly Valued
MG Grade B-
MG Value based on 3% Growth $60.35
MG Value based on 0% Growth $35.38
Market Implied Growth Rate 3.34%
Current Price $63.15
% of Intrinsic Value 89.18%

PACCAR Inc qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position. . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $3.24 in 2014 to an estimated $4.16 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 3.34% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into PACCAR Inc revealed the company was trading above its Graham Number of $51.89. The company pays a dividend of $0.99 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 15.17, which was below the industry average of 28.03, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $3.89.

PACCAR Inc performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $3.89
Graham Number $51.89
PEmg 15.17
Current Ratio 2.45
PB Ratio 2.61
Current Dividend $0.99
Dividend Yield 1.57%
Number of Consecutive Years of Dividend Growth 7

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $16,588,200,000
Total Current Liabilities $6,764,100,000
Long-Term Debt $5,895,800,000
Total Assets $23,781,700,000
Intangible Assets $0
Total Liabilities $15,214,400,000
Shares Outstanding (Diluted Average) 353,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.23
Dec2017 $4.75
Dec2016 $1.48
Dec2015 $4.51
Dec2014 $3.82
Dec2013 $3.30
Dec2012 $3.12
Dec2011 $2.86
Dec2010 $1.25
Dec2009 $0.31
Dec2008 $2.78
Dec2007 $3.29
Dec2006 $3.97
Dec2005 $2.91
Dec2004 $2.29
Dec2003 $1.33
Dec2002 $0.95
Dec2001 $0.44
Dec2000 $1.13
Dec1999 $1.46
Dec1998 $1.05

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.16
Dec2017 $3.61
Dec2016 $3.11
Dec2015 $3.79
Dec2014 $3.24
Dec2013 $2.69
Dec2012 $2.28
Dec2011 $1.94
Dec2010 $1.76
Dec2009 $2.23
Dec2008 $3.14
Dec2007 $3.13
Dec2006 $2.80
Dec2005 $2.00
Dec2004 $1.44
Dec2003 $1.03
Dec2002 $0.93

Recommended Reading:

Other ModernGraham posts about the company

PACCAR Inc Valuation – February 2017 $PCAR
15 Best Undervalued Stocks of the Week – 8/20/16
PACCAR Inc Valuation – August 2016 $PCAR
10 Most Undervalued Companies for the Defensive Investor – July 2016
10 Most Undervalued Companies for the Defensive Investor – June 2016

Other ModernGraham posts about related companies

W.W. Grainger Inc Valuation – May 2018 $GWW
Allegion PLC Valuation – May 2018 $ALLE
Xylem Inc Valuation – May 2018 $XYL
Arconic Inc Valuation – April 2018 $ARNC
Rockwell Automation Inc Valuation – April 2018 $ROK
Roper Technologies Inc Valuation – April 2018 $ROP
Eaton Corp PLC Valuation – March 2018 $ETN
Fastenal Co Valuation – March 2018 $FAST
Deere & Co Valuation – March 2018 $DE
A.O. Smith Corp Valuation – March 2018 $AOS

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

PACCAR Inc Valuation – February 2017 $PCAR

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – January 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how PACCAR Inc (PCAR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): PACCAR Inc (PACCAR) is a global technology company engaged in the design, manufacture and customer support of trucks. The Company operates in three segments: the Truck segment, which includes the design, manufacture and distribution of light-, medium- and heavy-duty commercial trucks; the Parts segment, which includes the distribution of aftermarket parts for trucks and related commercial vehicles, and the Financial Services segment, which includes the finance and leasing products, and services provided to customers and dealers. PACCAR’s other businesses include a division of the Company, which manufactures industrial winches in over two the United States plants and markets them under the Braden, Carco and Gearmatic nameplates. PACCAR’s trucks are marketed under the Kenworth, Peterbilt and DAF nameplates. PACCAR’s finance and leasing activities are principally related to PACCAR products and associated equipment. PACCAR Financial Services (PFS) operates in over 20 countries.

PCAR Chart

PCAR data by YCharts

[level-free]
To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of PCAR – February 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $24,327,983,664 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.11 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 114.06% Pass
6. Moderate PEmg Ratio PEmg < 20 21.91 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.56 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.11 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $3.13
MG Growth Estimate 2.42%
MG Value $41.72
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $45.33
MG Value based on 0% Growth $26.57
Market Implied Growth Rate 6.70%
Current Price $68.49
% of Intrinsic Value 164.18%

PACCAR Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor is only concerned with the low current ratio. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.69 in 2013 to an estimated $3.13 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.7% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into PACCAR Inc revealed the company was trading above its Graham Number of $37.88. The company pays a dividend of $0.96 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 21.91, which was below the industry average of 22.25, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-26.57.

PACCAR Inc receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$26.57
Graham Number $37.88
PEmg 21.91
Current Ratio 1.11
PB Ratio 3.56
Current Dividend $0.96
Dividend Yield 1.40%
Number of Consecutive Years of Dividend Growth 7

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $4,512,600,000
Total Current Liabilities $4,056,200,000
Long-Term Debt $0
Total Assets $20,638,900,000
Intangible Assets $0
Total Liabilities $13,861,300,000
Shares Outstanding (Diluted Average) 351,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.30
Dec2016 $1.48
Dec2015 $4.51
Dec2014 $3.82
Dec2013 $3.30
Dec2012 $3.12
Dec2011 $2.86
Dec2010 $1.25
Dec2009 $0.31
Dec2008 $2.78
Dec2007 $3.29
Dec2006 $3.97
Dec2005 $2.91
Dec2004 $2.29
Dec2003 $1.33
Dec2002 $0.95
Dec2001 $0.44
Dec2000 $1.13
Dec1999 $1.46
Dec1998 $1.05
Dec1997 $0.87

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.13
Dec2016 $3.11
Dec2015 $3.79
Dec2014 $3.24
Dec2013 $2.69
Dec2012 $2.28
Dec2011 $1.94
Dec2010 $1.76
Dec2009 $2.23
Dec2008 $3.14
Dec2007 $3.13
Dec2006 $2.80
Dec2005 $2.00
Dec2004 $1.44
Dec2003 $1.03
Dec2002 $0.93
Dec2001 $0.94

Recommended Reading:

Other ModernGraham posts about the company

10 Most Undervalued Companies for the Defensive Investor – July 2016
10 Most Undervalued Companies for the Defensive Investor – June 2016
10 Most Undervalued Companies for the Defensive Investor – May 2016
10 Most Undervalued Companies for the Defensive Investor – February 2016
18 Best Stocks For Value Investors This Week – 1/30/16

Other ModernGraham posts about related companies

John Bean Technologies Corp Valuation – Initial Coverage $JBT
W. W. Grainger Inc Valuation – January 2017 $GWW
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Xylem Inc Valuation – January 2017 $XYL
Clarcor Inc Valuation – Initial Coverage $CLC
Caterpillar Inc Valuation – August 2016 $CAT
Regal Beloit Corp Valuation – August 2016 $RBC
Snap-on Incorporated Valuation – August 2016 $SNA
AGCO Corporation Valuation – August 2016 $AGCO
PACCAR Inc Valuation – August 2016 $PCAR

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

PACCAR Inc Valuation – August 2016 $PCAR

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today - July 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how PACCAR Inc (PCAR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): PACCAR Inc (PACCAR) is a global technology company engaged in the design, manufacture and customer support of trucks. The Company operates in three segments: the Truck segment, which includes the design, manufacture and distribution of light-, medium- and heavy-duty commercial trucks; the Parts segment, which includes the distribution of aftermarket parts for trucks and related commercial vehicles, and the Financial Services segment, which includes the finance and leasing products, and services provided to customers and dealers. PACCAR’s other businesses include a division of the Company, which manufactures industrial winches in over two the United States plants and markets them under the Braden, Carco and Gearmatic nameplates. PACCAR’s trucks are marketed under the Kenworth, Peterbilt and DAF nameplates. PACCAR’s finance and leasing activities are principally related to PACCAR products and associated equipment. PACCAR Financial Services (PFS) operates in over 20 countries.

PCAR Chart

PCAR data by YCharts

[level-free]
To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of PCAR – August 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $20,726,817,206 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.46 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 52.98% Pass
6. Moderate PEmg Ratio PEmg < 20 19.11 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.10 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.46 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.69 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

PCAR value chart August 2016

EPSmg $3.09
MG Growth Estimate 5.34%
MG Value $59.31
Opinion Fairly Valued
MG Grade B-
MG Value based on 3% Growth $44.82
MG Value based on 0% Growth $26.28
Market Implied Growth Rate 5.31%
Current Price $59.08
% of Intrinsic Value 99.60%

PACCAR Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high PB ratio. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.28 in 2012 to an estimated $3.09 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 5.31% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into PACCAR Inc revealed the company was trading above its Graham Number of $24.82. The company pays a dividend of $0.96 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 19.11, which was below the industry average of 20.76, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-0.09.

PACCAR Inc performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

PCAR charts August 2016

Net Current Asset Value (NCAV) -$0.09
Graham Number $24.82
PEmg 19.11
Current Ratio 2.46
PB Ratio 3.10
Current Dividend $0.96
Dividend Yield 1.62%
Number of Consecutive Years of Dividend Growth 6

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Total Current Assets $14,686,700,000
Total Current Liabilities $5,976,400,000
Long-Term Debt $6,018,100,000
Total Assets $21,427,200,000
Intangible Assets $0
Total Liabilities $14,717,500,000
Shares Outstanding (Diluted Average) 351,600,000

Earnings Per Share History

Next Fiscal Year Estimate $1.43
Dec2015 $4.51
Dec2014 $3.82
Dec2013 $3.30
Dec2012 $3.12
Dec2011 $2.86
Dec2010 $1.25
Dec2009 $0.31
Dec2008 $2.78
Dec2007 $3.29
Dec2006 $3.97
Dec2005 $2.91
Dec2004 $2.29
Dec2003 $1.33
Dec2002 $0.95
Dec2001 $0.44
Dec2000 $1.13
Dec1999 $1.46
Dec1998 $1.05
Dec1997 $0.87
Dec1996 $0.51

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.09
Dec2015 $3.79
Dec2014 $3.24
Dec2013 $2.69
Dec2012 $2.28
Dec2011 $1.94
Dec2010 $1.76
Dec2009 $2.23
Dec2008 $3.14
Dec2007 $3.13
Dec2006 $2.80
Dec2005 $2.00
Dec2004 $1.44
Dec2003 $1.03
Dec2002 $0.93
Dec2001 $0.94
Dec2000 $1.13

Recommended Reading:

Other ModernGraham posts about the company

10 Most Undervalued Companies for the Defensive Investor – November 2015
Paccar Inc. Analysis – October 2015 Update $PCAR
The 9 Best Stocks For Value Investors This Week – 7/18/15
Paccar Inc. Analysis – July 2015 Update $PCAR
27 Companies in the Spotlight This Week – 4/4/15

Other ModernGraham posts about related companies

W.W. Grainger Inc Valuation – August 2016 $GWW
Allegion PLC Valuation – August 2016 $ALLE
Xylem Inc Valuation – August 2016 $XYL
Rockwell Automation Inc Valuation – July 2016 $ROK
Roper Technologies Inc Valuation – July 2016 $ROP
Eaton Corp Valuation – July 2016 $ETN
Parker-Hannifin Corp Valuation – July 2016 $PH
Dover Corporation Valuation – July 2016 $DOV
Fastenal Company Valuation – July 2016 $FAST
Deere & Company Valuation – June 2016 $DE

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Paccar Inc Valuation – January 2016 Update $PCAR

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – November 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Paccar Inc (PCAR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): PACCAR Inc is a company operating in three principal industry segments: the Truck segment, includes the design, manufacture and distribution of light-, medium- and heavy-duty commercial trucks; the Parts segment, includes the distribution of aftermarket parts for trucks and related commercial vehicles, and the Financial Services segment, includes finance and leasing products and services provided to customers and dealers in the United States, Canada, Mexico, Europe and Australia. The Company also operates in Australia and Brazil, and sells trucks and parts to customers in Asia, Africa, Middle East and South America. The Company’s trucks are marketed under the Kenworth, Peterbilt and DAF nameplates. It also manufactures industrial winches in two plants in the United States.

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To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of PCAR

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $16,806,819,987 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.82 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 15.04% Fail
6. Moderate PEmg Ratio PEmg < 20 12.47 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.27 Pass
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.82 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.63 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

PCAR value chart January 2016

EPSmg $3.76
MG Growth Estimate 14.11%
MG Value $138.12
Opinion Undervalued
MG Value based on 3% Growth $54.55
MG Value based on 0% Growth $31.98
Market Implied Growth Rate 1.98%
Current Price $46.91
% of Intrinsic Value 33.96%

Paccar Inc qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  The Defensive Investor is only concerned by the insufficient earnings growth over the last ten years while the Enterprising Investor has no initial concerns.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.94 in 2011 to an estimated $3.76 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.98% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Paccar Inc (PCAR)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

PCAR charts January 2016

Net Current Asset Value (NCAV) $2.88
Graham Number $45.50
PEmg 12.47
Current Ratio 2.82
PB Ratio 2.27
Dividend Yield 1.92%
Number of Consecutive Years of Dividend Growth 5

 

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information Sep15
Total Current Assets $15,199,400,000
Total Current Liabilities $5,389,800,000
Long-Term Debt $6,143,700,000
Total Assets $21,519,800,000
Intangible Assets $0
Total Liabilities $14,176,000,000
Shares Outstanding (Diluted Average) 355,900,000

Earnings Per Share History

Next Fiscal Year Estimate $4.43
Dec14 $3.82
Dec13 $3.30
Dec12 $3.12
Dec11 $2.86
Dec10 $1.25
Dec09 $0.31
Dec08 $2.78
Dec07 $3.29
Dec06 $3.97
Dec05 $2.91
Dec04 $2.29
Dec03 $1.33
Dec02 $0.95
Dec01 $0.44
Dec00 $1.13
Dec99 $1.46
Dec98 $1.05
Dec97 $0.87
Dec96 $0.51

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.76
Dec14 $3.24
Dec13 $2.69
Dec12 $2.28
Dec11 $1.94
Dec10 $1.76
Dec09 $2.23
Dec08 $3.14
Dec07 $3.13
Dec06 $2.80
Dec05 $2.00
Dec04 $1.44
Dec03 $1.03
Dec02 $0.93
Dec01 $0.94
Dec00 $1.13
Dec99 $1.01

Recommended Reading:

Other ModernGraham posts about the company

10 Most Undervalued Companies for the Defensive Investor – November 2015
Paccar Inc. Analysis – October 2015 Update $PCAR
The 9 Best Stocks For Value Investors This Week – 7/18/15
Paccar Inc. Analysis – July 2015 Update $PCAR
27 Companies in the Spotlight This Week – 4/4/15

Other ModernGraham posts about related companies

Xylem Inc Valuation – January 2016 Update $XYL
Xylem Inc Valuation – January 2016 Update $XYL
Roper Technologies Inc Valuation – January 2016 Update $ROP
W W Grainger Inc Valuation – January 2016 Update $GWW
Deere & Company Valuation – January 2016 Update $DE
Cummins Inc Valuation – December 2015 Update $CMI
Dover Corp Valuation – December 2015 Update $DOV
Fastenal Co Valuation – November 2015 Update $FAST
Pentair PLC Valuation – November 2015 Update $PNR
A.O. Smith Corp Valuation – November 2015 Update $AOS

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Paccar Inc. Analysis – October 2015 Update $PCAR

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – September 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Paccar Inc. (PCAR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): PACCAR Inc is a company operating in three principal industry segments: the Truck segment, includes the design, manufacture and distribution of light-, medium- and heavy-duty commercial trucks; the Parts segment, includes the distribution of aftermarket parts for trucks and related commercial vehicles, and the Financial Services segment, includes finance and leasing products and services provided to customers and dealers in the United States, Canada, Mexico, Europe and Australia. The Company also operates in Australia and Brazil, and sells trucks and parts to customers in Asia, Africa, Middle East and South America. The Company’s trucks are marketed under the Kenworth, Peterbilt and DAF nameplates. It also manufactures industrial winches in two plants in the United States.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[level-mg-stocks-screens-subscriber]

Downloadable PDF version of this valuation:

ModernGraham Valuation of PCAR

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $19,242,515,401 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.66 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 16.24% Fail
6. Moderate PEmg Ratio PEmg < 20 14.37 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.70 Pass
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.66 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.63 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

PCAR value chart October 2015

EPSmg $3.80
MG Growth Estimate 14.42%
MG Value $141.94
Opinion Undervalued
MG Value based on 3% Growth $55.13
MG Value based on 0% Growth $32.32
Market Implied Growth Rate 2.93%
Current Price $54.62
% of Intrinsic Value 38.48%

Paccar Inc. qualifies for the both the Defensive Investor and the Enterprising Investor.  The Defensive Investor is only concerned with the insufficient earnings growth over the last ten years.  The Enterprising Investor has no initial concerns.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.94 in 2011 to an estimated $3.80 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.93% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Paccar Inc. (PCAR)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

PCAR charts October 2015

Net Current Asset Value (NCAV) $2.68
Graham Number $45.63
PEmg 14.37
Current Ratio 2.66
PB Ratio 2.70
Dividend Yield 1.61%
Number of Consecutive Years of Dividend Growth 5

 

[/level-mg-stocks-screens-subscriber]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $15,153,200,000
Total Current Liabilities $5,699,300,000
Long-Term Debt $5,914,200,000
Total Assets $21,415,300,000
Intangible Assets $0
Total Liabilities $14,196,700,000
Shares Outstanding (Diluted Average) 356,300,000

Earnings Per Share History

Next Fiscal Year Estimate $4.55
Dec14 $3.82
Dec13 $3.30
Dec12 $3.12
Dec11 $2.86
Dec10 $1.25
Dec09 $0.31
Dec08 $2.78
Dec07 $3.29
Dec06 $3.97
Dec05 $2.91
Dec04 $2.29
Dec03 $1.33
Dec02 $0.95
Dec01 $0.44
Dec00 $1.13
Dec99 $1.46
Dec98 $1.05
Dec97 $0.87
Dec96 $0.51
Dec95 $0.64

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.80
Dec14 $3.24
Dec13 $2.69
Dec12 $2.28
Dec11 $1.94
Dec10 $1.76
Dec09 $2.23
Dec08 $3.14
Dec07 $3.13
Dec06 $2.80
Dec05 $2.00
Dec04 $1.44
Dec03 $1.03
Dec02 $0.93
Dec01 $0.94
Dec00 $1.13
Dec99 $1.05

Recommended Reading:

Other ModernGraham posts about the company

The 9 Best Stocks For Value Investors This Week – 7/18/15
Paccar Inc. Analysis – July 2015 Update $PCAR
27 Companies in the Spotlight This Week – 4/4/15
Paccar Inc. Quarterly Valuation – March 2015 $PCAR
17 Companies in the Spotlight This Week – 3/29/14

Other ModernGraham posts about related companies

W.W. Grainger Inc. Analysis – October 2015 Update $GWW
My Personal Holdings: Deere & Company – October 2015 Update $DE
Allegion PLC Analysis – September 2015 Update $ALLE
Parker Hannifin Corporation Analysis – September 2015 Update $PH
Roper Technologies Inc. Analysis – September 2015 Update $ROP
My Personal Holdings: Dover Corporation – September 2015 Update $DOV
Xylem Inc. Analysis – August 2015 Update $XYL
Cummins Inc. Analysis – August 2015 Update $CMI
Fastenal Company Analysis – August 2015 Update $FAST
A.O. Smith Corporation Analysis – Initial Coverage $AOS

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Paccar Inc. Analysis – July 2015 Update $PCAR

500px-Paccar_Inc_logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – June 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Paccar Inc. (PCAR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): PACCAR Inc is a company operating in three principal industry segments: the Truck segment, includes the design, manufacture and distribution of light-, medium- and heavy-duty commercial trucks; the Parts segment, includes the distribution of aftermarket parts for trucks and related commercial vehicles, and the Financial Services segment, includes finance and leasing products and services provided to customers and dealers in the United States, Canada, Mexico, Europe and Australia. The Company also operates in Australia and Brazil, and sells trucks and parts to customers in Asia, Africa, Middle East and South America. The Company’s trucks are marketed under the Kenworth, Peterbilt and DAF nameplates. It also manufactures industrial winches in two plants in the United States.

[level-free]
To read the rest of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.
[/level-free]
[level-mg-stocks-screens-subscriber]

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion - PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 - PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years - PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years - PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period - FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 - PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 - FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 - PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 - PASS
  3. Earnings Stability – positive earnings per share for at least 5 years - PASS
  4. Dividend Record – currently pays a dividend - PASS
  5. Earnings growth – EPSmg greater than 5 years ago - PASS

Valuation Summary

Key Data:

Recent Price $65.54
MG Value $137.18
MG Opinion Undervalued
Value Based on 3% Growth $54.40
Value Based on 0% Growth $31.89
Market Implied Growth Rate 4.48%
Net Current Asset Value (NCAV) $1.91
PEmg 17.47
Current Ratio 2.82
PB Ratio 3.47

Balance Sheet – March 2015

Current Assets $14,276,000,000
Current Liabilities $5,062,000,000
Total Debt $6,000,000,000
Total Assets $20,327,000,000
Intangible Assets $0
Total Liabilities $13,595,000,000
Outstanding Shares 356,100,000

Earnings Per Share

2015 (estimate) $4.40
2014 $3.82
2013 $3.30
2012 $3.12
2011 $2.86
2010 $1.25
2009 $0.31
2008 $2.78
2007 $3.29
2006 $3.97
2005 $2.91

Earnings Per Share – ModernGraham

2015 (estimate) $3.75
2014 $3.24
2013 $2.69
2012 $2.28
2011 $1.94
2010 $1.76

Dividend History

Conclusion:

Paccar Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient level of growth over the last ten years and the high PEmg ratio.  The Enterprising Investor has no initial concerns.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the evaluation.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.94 in 2011 to an estimated $3.75 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.48% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value well above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Paccar Inc. (PCAR)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

[/level-mg-stocks-screens-subscriber]

Paccar Inc. Quarterly Valuation – March 2015 $PCAR

500px-Paccar_Inc_logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – March 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Paccar Inc. (PCAR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): PACCAR Inc is engaged in the design, manufacture and customer support of light, medium- and heavy-duty trucks under the Kenworth, Peterbilt and DAF nameplates. The Company also provides customized financial services, information technology and truck parts related to its principal business. The Company operates in three segments: design, manufacture and distribution of light-, medium- and heavy-duty trucks; distribution of parts for the truck aftermarket and related commercial vehicles; and finance and leasing products and services provided to customers and dealers. The Company and its subsidiaries designs and manufactures heavy-duty diesel trucks, which are marketed under the Kenworth, Peterbilt and DAF nameplates. The Company’s Financial Services (PFS) operates in 23 countries principally in North America, Europe, Australia and South America through wholly owned finance companies operating under the PACCAR Financial trade name.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion - PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 - PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years - PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years - PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period - FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 - PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 - FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 - PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend - PASS
  5. Earnings growth – EPSmg greater than 5 years ago - PASS

Valuation Summary

Key Data:

Recent Price $62.17
MG Value $109.59
MG Opinion Undervalued
Value Based on 3% Growth $47.01
Value Based on 0% Growth $27.56
Market Implied Growth Rate 5.34%
Net Current Asset Value (NCAV) $1.26
PEmg 19.18
Current Ratio 2.52
PB Ratio 3.28

Balance Sheet - December 2014

Current Assets $14,316,000,000
Current Liabilities $5,678,000,000
Total Debt $5,589,000,000
Total Assets $20,619,000,000
Intangible Assets $0
Total Liabilities $13,866,000,000
Outstanding Shares 355,800,000

Earnings Per Share

2014 $3.82
2013 $3.30
2012 $3.12
2011 $2.86
2010 $1.25
2009 $0.31
2008 $2.78
2007 $3.29
2006 $3.97
2005 $2.91
2004 $2.29

Earnings Per Share – ModernGraham

2014 $3.24
2013 $2.69
2012 $2.28
2011 $1.94
2010 $1.76
2009 $2.23

Dividend History

Conclusion:

Paccar Inc. is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the insufficient earnings growth over the last ten years and the high PB ratio, while the Enterprising Investor has no initial concerns.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.76 in 2010 to $3.24 for 2014.  This level of demonstrated growth is greater than the market’s implied estimate of 5.34% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.

Be sure to check out previous ModernGraham valuations of Paccar Inc. (PCAR) for greater perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Paccar Inc. (PCAR)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Paccar Inc. (PCAR) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Paccar Inc. (PCAR) Annual Valuation – 2014

500px-Paccar_Inc_logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Paccar Inc. fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): PACCAR Inc (PACCAR) is engaged in the design, manufacture and customer support of light, medium- and heavy-duty trucks under the Kenworth, Peterbilt and DAF nameplates. The company also provides customized financial services, information technology and truck parts related to its principal business. The Company operates in three segments: design, manufacture and distribution of light-, medium- and heavy-duty trucks, distribution of parts for the truck aftermarket and related commercial vehicles, and finance and leasing products and services provided to customers and dealers. The Company’s finance and leasing activities are principally related to Company products and associated equipment. The Company’s other business is the manufacturing and marketing of industrial winches.

PCAR Chart

PCAR data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $67.39
MG Value $39.75
MG Opinion Overvalued
Value Based on 3% Growth $39.02
Value Based on 0% Growth $22.88
Market Implied Growth Rate 8.27%
Net Current Asset Value (NCAV) -$25.47
PEmg 25.04
Current Ratio 0.41
PB Ratio 3.60

Balance Sheet – 12/31/2013

Current Assets $5,066,500,000
Current Liabilities $12,263,000,000
Total Debt $0
Total Assets $20,725,500,000
Intangible Assets $0
Total Liabilities $14,091,200,000
Outstanding Shares 354,300,000

Earnings Per Share

2013 $3.30
2012 $3.12
2011 $2.86
2010 $1.25
2009 $0.31
2008 $2.78
2007 $3.29
2006 $3.97
2005 $2.91
2004 $2.29

Earnings Per Share – ModernGraham

2013 $2.69
2012 $2.28
2011 $1.94
2010 $1.76
2009 $2.23
2008 $3.14

Dividend History

PCAR Dividend Chart

PCAR Dividend data by YCharts

Conclusion:

Paccar Inc. does not satisfy the requirements of either the Defensive Investor or the Enterprising Investor.  The company fails the Defensive Investor’s requirements due to the poor current ratio, lack of sufficient earnings growth over the last ten years, and the high PEmg and PB ratios.  For the Enterprising Investor, the company fails because of the high level of debt relative to the current assets.  As a result, value investors seeking to follow the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities, through a review of 5 Undervalued Companies for the Enterprising Investor and ModernGraham’s valuation of Ford Motor Company (F).  From a valuation perspective, the company appears to be overvalued, after growing its EPSmg (normalized earnings) from $2.23 in 2009 to $2.69 in 2013.  This demonstrated level of growth does not support the market’s implied estimate of 8.27% earnings growth, and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls below a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Paccar Inc. (PCAR)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in Paccar Inc. (PCAR) or any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.

Logo taken from Wikipedia; this article is not affiliated with the company in any manner.

Copart Inc Valuation – April 2019 #CPRT

Company Profile (excerpt from Reuters): Copart, Inc. (Copart), incorporated on January 6, 2012, is a provider of online auctions and vehicle remarketing services in the United States, Canada, the United Kingdom, the United Arab Emirates, Oman, Bahrain, Brazil, Ireland, Spain and India. The Company also provides vehicle remarketing services in Germany. The Company operates through two segments: United States and International. The Company provides vehicle sellers with a range of services to process and sell vehicles primarily over the Internet through its virtual bidding third generation Internet auction-style sales technology (VB3). It sells vehicles primarily to insurance companies, such as banks and financial institutions, charities, car dealerships, municipalities, fleet operators and vehicle rental companies. The Company sells the vehicles principally to licensed vehicle dismantlers, rebuilders, repair licensees, used vehicle dealers and exporters and, at certain locations, to the general public.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CPRT – April 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $14,418,055,149 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.69 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 227.38% Pass
6. Moderate PEmg Ratio PEmg < 20 37.14 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 10.41 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.69 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.55 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.70
MG Growth Estimate 15.00%
MG Value $65.48
Opinion Fairly Valued
MG Grade D
MG Value based on 3% Growth $24.66
MG Value based on 0% Growth $14.46
Market Implied Growth Rate 14.32%
Current Price $63.17
% of Intrinsic Value 96.48%

Copart, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $0.73 in 2015 to an estimated $1.7 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 14.32% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Copart, Inc. revealed the company was trading above its Graham Number of $17.91. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 37.14, which was above the industry average of 22.44. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-0.87.

Copart, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$0.87
Graham Number $17.91
PEmg 37.14
Current Ratio 1.69
PB Ratio 10.41
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2019
Total Current Assets $628,466,000
Total Current Liabilities $372,033,000
Long-Term Debt $398,740,000
Total Assets $2,296,905,000
Intangible Assets $398,310,000
Total Liabilities $836,952,000
Shares Outstanding (Diluted Average) 240,660,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.11
Jul2018 $1.73
Jul2017 $1.66
Jul2016 $1.11
Jul2015 $0.84
Jul2014 $0.68
Jul2013 $0.70
Jul2012 $0.70
Jul2011 $0.54
Jul2010 $0.45
Jul2009 $0.42
Jul2008 $0.44
Jul2007 $0.37
Jul2006 $0.26
Jul2005 $0.28
Jul2004 $0.22
Jul2003 $0.16
Jul2002 $0.16
Jul2001 $0.13
Jul2000 $0.09
Jul1999 $0.07

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.70
Jul2018 $1.40
Jul2017 $1.15
Jul2016 $0.87
Jul2015 $0.73
Jul2014 $0.65
Jul2013 $0.61
Jul2012 $0.55
Jul2011 $0.46
Jul2010 $0.41
Jul2009 $0.38
Jul2008 $0.35
Jul2007 $0.29
Jul2006 $0.23
Jul2005 $0.21
Jul2004 $0.17
Jul2003 $0.14

Recommended Reading:

Other ModernGraham posts about the company

Copart Inc Valuation – August 2018 $CPRT
14 Best Stocks for Value Investors This Week – 2/11/17
Copart Inc Valuation – Initial Coverage $CPRT

Other ModernGraham posts about related companies

Harley-Davidson Inc Valuation – April 2019 #HOG
Advance Auto Parts Inc Valuation – March 2019 #AAP
LKQ Corp Valuation – March 2019 #LKQ
Aptiv PLC Valuation – March 2019 #APTV
Paccar Inc Valuation – March 2019 #PCAR
BorgWarner Inc Valuation – February 2019 $BWA
CarMax Inc Valuation – February 2019 $KMX
Ford Motor Co Valuation – February 2019 $F
General Motors Co Valuation – February 2019 $GM
O’Reilly Automotive Inc Valuation – February 2019 $ORLY

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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