Penske Automotive Group, Inc. (PAG): what the price assumes
In the published model solve dated 2026-Q2, anchored at $217.01, Penske Automotive Group, Inc. (PAG) is priced for -2.6% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-06-27.
Generated: 2026-08-31 · Source: https://boothcheck.com/report/PAG
Headline
| Field | Value |
|---|---|
| Ticker | PAG |
| Company | Penske Automotive Group, Inc. |
| Current price | $217.01/sh |
| Composition | Retail Automotive 89% / Retail Commercial Truck 11% |
What The Price Assumes (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin (value-band context) | 1.5% |
| Operating margin today | 3.8% |
| Margin compression (value-band) | -2.3pp |
| Implied growth | -2.6% |
| Multiple paid | 14x operating income |
The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.
Solve inputs: computed at a 7.9% cost of capital with 4% terminal growth over a 5-year stage.
How unusual the bet is: within-range (limited comparison data)
| Reference | Value |
|---|---|
| vs own history | -1.25σ |
| cohort percentile (of 212 peers) | 34 |
Valuation X-Ray
Every valuation family lands below the price. The price therefore sits beyond what those standard frames encode.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.31x | 5 | expensive |
| Earnings | 13.10x | 5 | expensive |
| Relative | — | 0 | — |
| Growth | 2.57x | 4 | expensive |
Families that call it expensive: Earnings, Growth
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.7%); the inversion above states its own rate.
Per-Model Detail (n=14)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $53.73 | 4.04x | yes | FCF base $0.6B, growth 1% (input: historical growth), terminal g 0.6%, WACC 7.7%, 5yr projection |
| DCF Exit Multiple | Growth | $205.99 | 1.05x | yes | Exit EV/EBITDA: 11.7x / 13.7x / 15.7x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | — | — | no | P/E 20x (static sector reference · 2026-04), scenarios: 16.9x / 20.0x / 23.1x (bear / base = reference held flat / bull), EV/EBITDA 14x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | $56.74 | 3.82x | yes | Stage 1: -10% for 5yr, Stage 2: 3.5% perpetual |
| Simple Excess Return | Asset | $149.13 | 1.46x | yes | BV/sh $88.56, ROE (TTM) 15.6%, ke 9.3% |
| Two-Stage Excess Return | Asset | $191.12 | 1.14x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $165.39 | 1.31x | yes | Rev $32.2B, growth 1% (input: historical growth; tapered), Terminal P/S: 0.4x / 0.4x / 0.5x (bear / base = today's held flat / bull, cap 8x) |
| Growth-Adjusted P/E | Relative | — | — | no | — |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $140.19 | 1.55x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $1.39B × (1−26%) / WACC 7.7% → EPV (no growth) |
| Residual Income | Asset | $195.09 | 1.11x | yes | BV $88.56 + 5yr PV of (ROE (TTM) 15.6% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $165.59 | 1.31x | yes | √(22.5 × EPS $13.76 × BVPS $88.56) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | — | — | no | EBITDA $1.42B × sector EV/EBITDA 14.0x |
| FCF Yield | Earnings | $16.56 | 13.10x | yes | FCF $592.1M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $11.70 | 18.55x | yes | SBC-adj FCF $0.56B (FCF $0.59B − SBC $0.03B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $11.53 | 18.82x | yes | EPS $13.76 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $25.67 | 8.45x | yes | BV $88.56 × (ROIC 2.2% / WACC 7.7%) |
| P/Sales Sector | Relative | — | — | no | Revenue $32.20B × sector P/S 1.5x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | $148.76 | 1.46x | yes | EPS $13.76 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Economic-Unit Decomposition (Sum Of The Parts)
One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.
| Unit | Role | Valuation basis | Revenue | Reported profit | Value evidence | Status |
|---|---|---|---|---|---|---|
| Retail Automotive | operating | enterprise | $27.5b | $847.8m operating-income | withheld | unresolved no unit value |
| Retail Commercial Truck | operating | enterprise | $3.4b | $174.7m operating-income | withheld | unresolved no unit value |
| Other | operating | enterprise | $922.6m | $48.9m operating-income | withheld | unresolved no unit value |
| Non-Automotive Investments | operating | enterprise | $0 | $192.3m operating-income | withheld | unresolved no unit value |
No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.
Solvency
| Field | Value |
|---|---|
| Net debt | $2.4b |
| Net debt / NOPAT (after-tax) | 2.71x |
| Net debt / operating income (pre-tax) | 2.00x |
| Share count CAGR (buyback) | -3.5% |
| Burning cash | no |
Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.
Bullet Takeaways
- The balance sheet tells the story: book value per share is about $86 against a $174.71 price, so you are paying roughly 2x a tangible, asset-heavy dealership base. The asset-based methods land near or above the price, which anchors the downside.
- At $174.71 the market pays only about 12x company-wide operating income, a level so low it sits below what even a 5%-a-year decline in operating profit would warrant. The price embeds a business in slow decline, not growth.
- The mix is recurring-revenue strong, cyclical-units weak. Q1 2026 service and parts hit a record (up 4.6%) while commercial truck unit sales fell sharply on tariff-driven order weakness and a soft freight market. EPS was $3.56, down from $3.86.
Bull Case
Lead with the balance sheet, because for Penske it reveals what management thinks of its own business. Book value per share sits around $86 against a $174.71 price (June 27, 2026), so the market is paying roughly two times the equity of a company that owns real, sellable assets: dealership real estate, franchise rights, and inventory. Management has been shrinking the share count at about 3.9% a year through buybacks and just raised the dividend to $1.40, a roughly 3.4% yield it describes as the highest in its peer group (Penske Q1 2026, Yahoo Finance). A management team buying back stock and raising the dividend at this valuation is signaling confidence that the asset base is worth more than the market is paying.
The revenue mix is more defensive than the auto-dealer label suggests. Penske is a premium-brand retailer (heavy in BMW, Mercedes, Audi, and Toyota/Lexus) plus the largest US commercial-truck dealer through Premier Truck Group, and the highest-margin, most recurring slice is service and parts. In Q1 2026 retail automotive service and parts revenue rose 4.6% to a Q1 record of $863.9 million (Penske Q1 2026, stocktitan). The filings emphasize a multi-channel model letting customers buy on site or remotely and the quality of the customer experience (FY2025 10-K, accession 0001628280-26-012830). Service and parts is the annuity that smooths the cyclicality of vehicle sales, and it set a record even in a softer quarter.
The valuation reflects a business priced for decline that is still executing. At about 12x operating income, below what even a modest profit decline would justify, with asset-based methods clustering around the price (Simple Excess Return $150, Graham Number $164, Earnings Power Value $142, Two-Stage Excess Return $195), Penske screens as value-and-asset-supported rather than a growth bet. The company is also still growing by acquisition, recently adding Toyota and Lexus stores expected to contribute hundreds of millions in annualized revenue, and it holds a stake in Penske Transportation Solutions that adds earnings the dealership multiple ignores. The bull case is a well-capitalized, premium-skewed retailer with a recurring service annuity, trading near book, returning cash, and priced as if its profits are about to fall.
Bear Case
The structural truth a holder has to face is cyclicality, and the commercial-truck segment just demonstrated it. Q1 2026 EPS fell to $3.56 from $3.86, and retail commercial-truck dealerships retailed 3,583 new and used units, down 953 from a year earlier, driven by reduced order intake in late 2025 following tariff implementation and weakness in the freight market (Penske Q1 2026, stocktitan). Auto and truck retailing are deeply cyclical: unit volumes, and the finance-and-insurance and gross-per-unit economics that ride on them, swing with the consumer, with interest rates, and with freight demand. The cheap 12x multiple is partly the market correctly pricing that the current earnings may be closer to a cyclical peak than a sustainable base.
The balance sheet that looks reassuring also carries real leverage. Net debt is about $2.6 billion, and that excludes the substantial floor-plan financing dealers use to carry inventory, which is a constant interest cost that rises with rates. Interest expense is not separately broken out in the filings, so coverage cannot be cleanly computed, but a rate environment that stays high pressures both floor-plan costs and the affordability of the vehicles Penske sells. A leveraged retailer in a rate-sensitive, cyclical business has its margins squeezed from both ends in a downturn.
The structural threats to the franchise model are the longer-term overhang. The traditional dealership depends on the franchise system and on internal-combustion service revenue; a faster shift to electric vehicles (fewer moving parts, less routine service) and any move by manufacturers toward direct-to-consumer sales would erode the two most valuable parts of the business at once. Tariffs are an immediate margin and demand risk, as the truck segment already shows. The peer cohort of Asbury, AutoNation, Lithia, and Group 1 are all competing for the same acquisitions and facing the same EV and direct-sales questions. The valuation methods that project forward (DCF Perpetual Growth at $47, Two-Stage DDM at $61) sit far below the price because trailing growth was negative, a reminder that the cheap multiple may reflect a business whose growth has stalled. The bear case is a cyclical, leveraged, structurally-challenged retailer near a possible earnings peak, where the asset-based floor near book is the only real protection.
Valuation
Penske is a value-and-asset-supported name, and the methods cluster in a coherent way around that. The asset-based methods land near or above the $174.71 price (Simple Excess Return $150, Two-Stage Excess Return $195, Residual Income $198, Graham Number $164, Earnings Power Value $142), and the EV/EBITDA-anchored relative read is higher still at $218. A few methods are distorted by negative trailing growth and a low-margin pass-through revenue base, the DCF Perpetual Growth at $47, the FCF-yield figures, and the P/Sales figure near $723 should all be ignored as artifacts. The credible cluster says Penske is worth roughly its current price to a modest premium on an asset and normalized-earnings basis.
The inversion sharpens it. At $174.71 the market pays about 12x company-wide operating income, computed at a 7.5% cost of capital with 4% terminal growth, a multiple so low it sits below what even a 5%-a-year operating-profit decline would warrant. That is a bound, not a solved growth rate: the price embeds an assumption that operating profit slowly erodes, which is the market discounting the cyclical and structural risks. The honest summary is that Penske is cheap on its assets and on normalized earnings, with the dividend and buyback adding support, but the cheapness is the market's verdict on cyclical and EV-related risk. For a value buyer comfortable with the cyclicality, the asset floor near book is the attraction; for everyone else, the low multiple is a warning, not a bargain.
Catalysts
Penske reported Q1 2026 results with revenue of $7.9 billion (down slightly from $8.0 billion) and EPS of $3.56, down from $3.86, with adjusted EPS of $3.05 (Penske Q1 2026, stocktitan). Retail automotive service and parts revenue rose 4.6% to a Q1 record of $863.9 million, while commercial-truck unit sales fell 953 units on tariff-driven order weakness and a soft freight market. The company raised its dividend to $1.40 (about a 3.4% yield) and continued acquiring premium stores, including Toyota and Lexus dealerships (Penske Q1 2026, Yahoo Finance).
The forward setup blends a cyclical recovery hope with steady capital return. Management said it is encouraged by commercial-truck market trends and expects an increase in new truck orders to be delivered in the second half of 2026, so the truck-segment recovery is a key swing factor. The catalysts to watch are interest rates and consumer affordability (which drive vehicle unit volumes and floor-plan costs), the freight-market and tariff backdrop for the truck business, the pace of accretive acquisitions, the service-and-parts annuity that smooths cyclicality, and the dividend and buyback as direct returns. Longer term, watch the EV transition and any manufacturer moves toward direct sales, since both bear on the franchise model. The second-half truck-order pickup and the next quarterly print are the near-term tests.
Peer Cohorts (Per Segment, With Filing Citations)
Retail Automotive (reported)
- AN (AUTONATION, INC.)
- FY2025 10-K: A used vehicle stores, which offer mobile automotive repair and maintenance services, as well as AutoNation Finance, our captive auto finance company. We expect to continue to expand the AutoNation Finance loan portfolio as we increase finance penetration rates at our stores. In addition, we offer AutoNation-branded…
- FY2025 10-K: …through our digital channels, and improving our ability to generate business through those channels. We offer an integrated retailing solution that provides customers with a seamless and intuitive omnichannel vehicle shopping and purchase experience. We continue to build omnichannel digital capabilities that provide…
- ABG (ASBURY AUTOMOTIVE GROUP, INC.)
- FY2025 10-K: …in automobile sales and services may have a material adverse effect on our results of operations. The automotive retail and service industry is highly competitive with respect to price, service, location, and selection. Our competition includes: (i) franchised automobile dealerships in our markets that sell the same…
- FY2025 10-K: …vehicle wholesale revenue, partially offset by a $56.3 million (1%) decrease in used vehicle retail revenue. Same store used vehicle revenue decreased by $185.0 million (4%) due to a $210.9 million (5%) decrease in used vehicle retail revenue, partially offset by a $25.9 million 45 Table of Contents (4%) increase in…
- LAD (Lithia Motors, Inc.)
- FY2025 10-K: …provide for prior written notice before a franchise may be terminated under most circumstances. We also sign master framework agreements with most manufacturers that impose additional requirements. See Item 1A. Risk Factors. Competition The retail automotive business is highly competitive. Currently, there are nearly…
- FY2025 10-K: …of vehicles and parts; • minimum working capital; • training of personnel; and • performance standards for market share and customer satisfaction. Each manufacturer closely monitors compliance with these requirements and requires each store to submit monthly financial statements. Franchise agreements also grant a…
- GPI (Group 1 Automotive, Inc)
- FY2025 10-K: …from customers and remitted to governmental authorities are reported on a net basis in the Company's Consolidated Financial Statements, thus excluded from revenues. The following tables present the Company's revenues disaggregated by its geographical segments (in millions): Year Ended December 31, 2025 U.S. U.K.…
- FY2025 10-K: …highest return opportunities. We evaluate all capital uses - including acquisitions, capital expenditures, share repurchases, dividends, debt reduction, real estate investments and organic growth - through a consistent return-based framework. Our acquisition strategy focuses on high-quality dealerships and brands in…
- SAH (SONIC AUTOMOTIVE, INC.)
- FY2025 10-K: …aftermarket products (collectively, "F&I") for our guests. The EchoPark Segment sells used cars and light trucks and arranges third-party F&I product sales for our guests in pre-owned vehicle specialty retail locations and does not offer customer-facing Fixed Operations services. The Powersports Segment offers…
- FY2025 10-K: …new vehicle revenue increased 5% in 2025, primarily driven by a 2% increase in retail new vehicle unit sales volume, driven in part by an increase in consumer demand for electric vehicles ahead of expiration of the federal tax credit in the third quarter of 2025, combined with a 2% increase in retail new vehicle…
- RUSHA (RUSH ENTERPRISES, INC.)
- FY2025 10-K: …to expand our dealership network by acquiring existing dealerships or opening new locations in areas where we do not already have locations. We believe the geographic diversity of our Rush Truck Center network has significantly expanded our customer base while reducing the effects of local economic cycles. ● Open New…
- FY2025 10-K: …2,500 to 3,000 light-duty vehicles and 6,500 to 7,500 used commercial vehicles in 2026. We expect lease and rental revenue to increase approximately 3.0% during 2026, compared to 2025. In 2026, we expect demand for Aftermarket Products and Services to remain relatively weak through the first quarter. However, we are…
- KMX (CARMAX, INC.)
- FY2025 10-K: …risks. BUSINESS RISKS We operate in a highly competitive industry. Failure to develop and execute strategies to remain the nation's largest retailer of used vehicles and to adapt to the increasing use of digital and online tools to market, buy, sell and finance used vehicles could adversely affect our business, sales…
- FY2025 10-K: …2025, approximately 54% of the customers who purchased a retail used vehicle also purchased an ESP and approximately 18% purchased GAP. 6 CarMax Auto Finance. CAF provides financing solely to customers buying retail vehicles from CarMax. CAF allows us to manage our reliance on third-party finance providers and to…
Retail Commercial Truck / Other / Non-Automotive Investments (reported)
- ABG (ASBURY AUTOMOTIVE GROUP, INC.)
- FY2025 10-K: …vehicle wholesale revenue, partially offset by a $56.3 million (1%) decrease in used vehicle retail revenue. Same store used vehicle revenue decreased by $185.0 million (4%) due to a $210.9 million (5%) decrease in used vehicle retail revenue, partially offset by a $25.9 million 45 Table of Contents (4%) increase in…
- FY2025 10-K: A should be read in conjunction with the accompanying audited consolidated financial statements and notes. Forward-looking statements in this MD&A are not guarantees of future performance and may involve risks and uncertainties that could cause actual results to differ materially from those projected. Refer to the…
- AN (AUTONATION, INC.)
- FY2025 10-K: …facilities owned and operated by independent businesses. The remediation or clean-up of facilities where the release of a regulated hazardous substance occurred is required under CERCLA and other laws. We have a proactive strategy related to environmental, health, and safety laws and regulations, which includes…
- FY2025 10-K: …received from manufacturers specifically to support store financing of new vehicle inventory). Floorplan interest rates are variable and, therefore, increase and decrease with changes in the underlying benchmark rates. See Note 7 of the Notes to the Consolidated Financial Statements for more information. Floorplan…
- LAD (Lithia Motors, Inc.)
- FY2025 10-K: …trade-ins, arranging of third-party financing, vehicle service and insurance contracts, future resale of used vehicles acquired through trade-in, and parts and service aftersales. 2025 vs. 2024 New vehicle revenue increased 2.1%, resulting from an increase in average selling prices of 2.5%, offset by a decrease in…
- FY2025 10-K: …meeting all levels of affordability, driving increased used vehicle unit volumes. Our used vehicle operations provide an opportunity to generate sales to customers unable or unwilling to purchase a new vehicle, sell brands other than the store's new vehicle franchise(s), access additional used vehicle inventory…
- GPI (Group 1 Automotive, Inc)
- FY2025 10-K: …from customers and remitted to governmental authorities are reported on a net basis in the Company's Consolidated Financial Statements, thus excluded from revenues. The following tables present the Company's revenues disaggregated by its geographical segments (in millions): Year Ended December 31, 2025 U.S. U.K.…
- FY2025 10-K: …of new information, new developments or otherwise, or to publicly release the result of any revision the forward-looking statements after the date they are made, except to the extent required by law. 2 PART I Item 1. Business General Group 1 Automotive, Inc. is a leading operator in the automotive retail industry. We…
- SAH (SONIC AUTOMOTIVE, INC.)
- FY2025 10-K: …aftermarket products (collectively, "F&I") for our guests. The EchoPark Segment sells used cars and light trucks and arranges third-party F&I product sales for our guests in pre-owned vehicle specialty retail locations and does not offer customer-facing Fixed Operations services. The Powersports Segment offers…
- FY2025 10-K: …the pricing strategy employed by the dealership, retail used vehicle gross profit per unit and retail used vehicle gross profit as a percentage of revenue may vary significantly from historical levels given recent trends in the used vehicle environment. Our consolidated reported retail used vehicle results were as…
- RUSHA (RUSH ENTERPRISES, INC.)
- FY2025 10-K: …to expand our dealership network by acquiring existing dealerships or opening new locations in areas where we do not already have locations. We believe the geographic diversity of our Rush Truck Center network has significantly expanded our customer base while reducing the effects of local economic cycles. ● Open New…
- FY2025 10-K: Our Truck Segment is moderately seasonal. Seasonal effects on new commercial vehicle sales related to the seasonal purchasing patterns of any single customer type are mitigated by the diverse geographic locations of our dealerships and our diverse customer base, including regional and national fleets, local and state…
- KMX (CARMAX, INC.)
- FY2025 10-K: …risks. BUSINESS RISKS We operate in a highly competitive industry. Failure to develop and execute strategies to remain the nation's largest retailer of used vehicles and to adapt to the increasing use of digital and online tools to market, buy, sell and finance used vehicles could adversely affect our business, sales…
- FY2025 10-K: …original equipment manufacturer program. We maximize customer choice by offering a large selection of inventory on our lots and by making our nationwide inventory available for viewing on our online platforms and mobile app. As of February 28, 2025, we had approximately 73,000 saleable retail vehicles in our…
- CVNA (CARVANA CO.)
- FY2025 10-K: …and (5) recognize revenue when (or as) performance obligations are satisfied. Retail Vehicle Sales The Company sells retail vehicles directly to its customers through its website. The prices of retail vehicles are set forth in the customer contracts at stand-alone selling prices which are agreed upon prior to…
- FY2025 10-K: …customers and can become a repeat buyer in the future. • Retail units sold allow us to benefit from economies of scale due to our centralized online sales model. We believe our model provides meaningful operating leverage in acquisition, reconditioning, transport, customer service, and delivery. We continue to…
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.