Penske Automotive Group, Inc. (PAG): what the price requires
The current priced-in claim for Penske Automotive Group, Inc. (PAG) is temporarily suppressed because the live engine record is unavailable. The dated report remains a snapshot, not a current market read.
Generated: 2026-07-14 · Exported: 2026-07-17 · Source: https://boothcheck.com/report/PAG
Headline
| Field | Value |
|---|---|
| Ticker | PAG |
| Company | Penske Automotive Group, Inc. |
| Current price | $192.81/sh |
| Composition | Retail Automotive 89% / Retail Commercial Truck 11% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 1.3% |
| Operating margin today | 4.0% |
| Margin compression implied | -2.7pp |
| Multiple paid | 13x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.
Solve inputs: computed at a 7.7% cost of capital with 4% terminal growth over a 5-year stage.
Reconcile: at the x-ray's 9.3% required return this reads ~2%/yr; the models below use their own rates.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -1.48σ |
| cohort percentile (of 210 peers) | 24 |
| implied end-window share | 0% |
Valuation X-Ray
The price is supported by asset-based and relative-multiple value, while earnings-power/growth-DCF land below the price. A value/asset-supported name, not a pure growth bet.
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 | 1.20x | 5 | expensive |
| Earnings | 7.56x | 4 | expensive |
| Relative | 0.79x | 3 | justifies |
| Growth | 2.18x | 4 | expensive |
Families that justify the price: Asset, Relative Families that call it expensive: Earnings, Growth
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.5%); the inversion above states its own rate.
Per-Model Detail (n=16)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $50.06 | 3.85x | yes | FCF base $0.6B, growth 0% (input: historical growth), terminal g 0.5%, WACC 7.5%, 5yr projection |
| DCF Exit Multiple | Growth | $185.79 | 1.04x | yes | Exit EV/EBITDA: 10.7x / 12.7x / 14.7x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $244.81 | 0.79x | yes | 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 | $63.95 | 3.02x | yes | Stage 1: -7% for 5yr, Stage 2: 3.5% perpetual |
| Simple Excess Return | Asset | $145.19 | 1.33x | yes | BV/sh $86.08, ROE (TTM) 15.6%, ke 9.3% |
| Two-Stage Excess Return | Asset | $186.22 | 1.04x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $143.22 | 1.35x | yes | Rev $31.0B, growth 0% (input: historical growth; tapered), Terminal P/S: 0.3x / 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 | $134.79 | 1.43x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $1.37B × (1−27%) / WACC 7.5% → EPV (no growth) |
| Residual Income | Asset | $190.04 | 1.01x | yes | BV $86.08 + 5yr PV of (ROE (TTM) 15.6% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $161.10 | 1.20x | yes | √(22.5 × EPS $13.40 × BVPS $86.08) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $220.61 | 0.87x | yes | EBITDA $1.43B × sector EV/EBITDA 14.0x |
| FCF Yield | Earnings | $14.09 | 13.68x | yes | FCF $596.8M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $9.05 | 21.30x | yes | SBC-adj FCF $0.57B (FCF $0.60B − SBC $0.03B) capitalized at Kₑ (excluded from median) |
| Ben Graham Formula | Earnings | $11.23 | 17.17x | yes | EPS $13.40 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $21.44 | 8.99x | yes | BV $86.08 × (ROIC 1.9% / WACC 7.5%) |
| P/Sales Sector | Relative | $706.55 | 0.27x | yes | Revenue $30.99B × sector P/S 1.5x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | $144.86 | 1.33x | yes | EPS $13.40 / 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 | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $2.6b |
| Net debt / NOPAT (after-tax) | 2.78x |
| Net debt / operating income (pre-tax) | 2.02x |
| Share count CAGR (buyback) | -3.9% |
| 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.)
- (no filing in the citation store)
- ABG (ASBURY AUTOMOTIVE GROUP, INC.)
- (no filing in the citation store)
- LAD (Lithia Motors, Inc.)
- (no filing in the citation store)
- GPI (Group 1 Automotive, Inc)
- (no filing in the citation store)
- SAH (SONIC AUTOMOTIVE, INC.)
- (no filing in the citation store)
- RUSHA (RUSH ENTERPRISES, INC.)
- (no filing in the citation store)
- KMX (CARMAX, INC.)
- (no filing in the citation store)
Retail Commercial Truck / Other / Non-Automotive Investments (reported)
- ABG (ASBURY AUTOMOTIVE GROUP, INC.)
- (no filing in the citation store)
- AN (AUTONATION, INC.)
- (no filing in the citation store)
- LAD (Lithia Motors, Inc.)
- (no filing in the citation store)
- GPI (Group 1 Automotive, Inc)
- (no filing in the citation store)
- SAH (SONIC AUTOMOTIVE, INC.)
- (no filing in the citation store)
- RUSHA (RUSH ENTERPRISES, INC.)
- (no filing in the citation store)
- KMX (CARMAX, INC.)
- (no filing in the citation store)
- CVNA (CARVANA CO.)
- (no filing in the citation store)
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.
- 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.