PACCAR Inc (PCAR): what the price requires
At today's price, PACCAR Inc (PCAR) is priced for +22.4% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/PCAR
Headline
| Field | Value |
|---|---|
| Ticker | PCAR |
| Company | PACCAR Inc |
| Current price | $124.19/sh |
| Composition | Industrial OEM 94% / Auto Financing 6% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | segment |
| Implied growth | 22.4% |
Solve inputs: computed at a 9.5% cost of capital with 5% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~8.4pp.
How unusual the bet is: elevated
| Reference | Value |
|---|---|
| cohort percentile (of 210 peers) | 75 |
| sustained it ~5 years at this level | 34% |
| implied end-window share | 0% |
Valuation X-Ray
Every valuation family lands below the price. The price therefore requires assumptions 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 | 2.09x | 4 | expensive |
| Earnings | 1.99x | 2 | expensive |
| Relative | 1.79x | 3 | expensive |
| Growth | 2.22x | 4 | expensive |
Families that call it expensive: Asset, Earnings, Relative, Growth
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.3%); the inversion above states its own rate.
Per-Model Detail (n=13)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $62.11 | 2.00x | yes | FCF base $3.9B, growth -10% (input: historical growth), terminal g 0.5%, WACC 9.3%, 5yr projection |
| DCF Exit Multiple | Growth | $116.03 | 1.07x | yes | Exit EV/EBITDA: 77.6x / 79.6x / 81.6x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $69.30 | 1.79x | yes | P/E 20x (static sector reference · 2026-04), scenarios: 16.9x / 20.0x / 23.1x (bear / base = reference held flat / bull), EV/EBITDA 28.6x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | $35.60 | 3.49x | yes | Stage 1: -23% for 5yr, Stage 2: 3.5% perpetual |
| Simple Excess Return | Asset | $50.75 | 2.45x | yes | BV/sh $37.46, ROE (TTM) 12.5%, ke 9.3% |
| Two-Stage Excess Return | Asset | $58.65 | 2.12x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $50.87 | 2.44x | yes | Rev $27.8B, growth -14% (input: historical growth; tapered), Terminal P/S: 2.0x / 2.4x / 2.7x (bear / base = today's held flat / bull, cap 8x) |
| Growth-Adjusted P/E | Relative | — | — | no | — |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | — | — | no | — |
| Residual Income | Asset | $60.29 | 2.06x | yes | BV $37.46 + 5yr PV of (ROE (TTM) 12.5% − Kₑ 9.3%) × BV; BV grows 8.1%/yr |
| Graham Number | Asset | $62.94 | 1.97x | yes | √(22.5 × EPS $4.70 × BVPS $37.46) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $20.27 | 6.13x | yes | EBITDA $0.82B × sector EV/EBITDA 13.0x |
| FCF Yield | Earnings | $80.35 | 1.55x | yes | FCF $3919.7M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | $3.94 | 31.52x | yes | EPS $4.70 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median) |
| ROIC-Justified P/B | Asset | — | — | no | — |
| P/Sales Sector | Relative | $79.01 | 1.57x | yes | Revenue $27.78B × sector P/S 1.5x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | $50.81 | 2.44x | yes | EPS $4.70 / 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 cash | $0 |
| Net debt / NOPAT (after-tax) | 0.00x |
| Net debt / operating income (pre-tax) | 0.00x |
| Share count CAGR (dilution) | 0.2% |
| Burning cash | no |
Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.
Bullet Takeaways
- PACCAR builds premium heavy trucks under Kenworth, Peterbilt, and DAF and holds roughly 30% of the North American Class 8 market, but the quieter engine is PACCAR Parts, the high-margin aftermarket business that earns a near-30% gross margin off the installed fleet.
- The trucks are cyclical and the cycle is soft: new-truck revenue fell year over year, yet profit rose on better mix and cost discipline, the Parts annuity smoothing the trough.
- The valuation is the catch, the price sits above what every standard method supports on current earnings, so the next read is whether the expected second-half 2026 pre-buy ahead of the 2027 emissions change lifts deliveries enough to grow into it.
Bull Case
What a trailing earnings multiple misses about PACCAR is that it is two businesses with very different economics wearing one ticker. The visible business is heavy trucks, deeply cyclical, currently soft, and the one the headline numbers track. The hidden business is PACCAR Parts, the aftermarket that sells the components and service contracts the installed base of Kenworth, Peterbilt, and DAF trucks consume for years after they roll off the lot. In the first quarter of 2026, Parts generated $1.7 billion of revenue and $402 million of profit at a 29.6% gross margin, multiples of the company-wide gross margin near 13%. That is a recurring, high-margin annuity that grows with the fleet and barely cycles, and a simple P/E on blended earnings does not separate it from the cyclical truck profit.
The truck business itself is showing the resilience that defines a premium franchise. First-quarter net income rose to $605.3 million from $505.1 million even as truck, parts, and other revenue fell to $6.2 billion from $6.9 billion, helped by better mix, cost discipline, and the absence of a prior-year litigation charge. A cyclical company that grows profit while revenue falls is demonstrating pricing power and operational control, the marks of the roughly 30% Class 8 market share PACCAR holds in North America.
The balance sheet is a genuine fortress, which for a cyclical is the whole game. The industrial business carries effectively no net debt, and the company funds its truck-finance arm separately. That lets PACCAR keep investing through the trough and keep returning capital, it just raised its regular quarterly dividend and has a long history of paying large special dividends on top. With the U.S. and Canadian truck market expected to accelerate in the second half of 2026 as customers buy ahead of the 2027 emissions change, the bull case is a premium, debt-free manufacturer with a high-margin parts annuity, entering a cyclical upswing from a position of strength.
Bear Case
The uncomfortable fact for a PACCAR holder is that the stock is not cheap even after accounting for the parts annuity, and the market knows it. Every family of valuation method, asset value, earnings power, peer multiples, and even the forward-growth models, sits below today's price. When no standard frame reaches the quote, the price is a bet beyond what any of them supports, and that is unusual for a cyclical industrial. The reason is the cycle: the price is being paid against earnings that are near a trough, so a normal multiple on a depressed number produces a forward P/E around 21x, rich for a heavy-truck maker whose end market is working through overcapacity.
That overcapacity is the structural overhang. The industry has been digesting a glut of trucks built in stronger years, and new-truck demand has stayed soft, which is why PACCAR's truck revenue fell year over year. The bull case rests on a second-half 2026 recovery driven by a pre-buy ahead of the 2027 emissions change, but pre-buys are precisely the kind of demand that pulls sales forward and leaves an air pocket behind. If freight rates do not firm and fleet capacity stays loose, the recovery slips, and a stock priced above every valuation method has no cushion when the expected upturn is delayed.
The cyclicality cuts deeper than the multiple suggests because the trough is not just lower volume, it is operating deleverage. PACCAR's incremental margins work powerfully in both directions: the same mix and cost discipline that grew profit this quarter reverse if volumes fall further, and the truck segment's earnings can drop faster than revenue in a genuine downturn. The parts annuity cushions this, but it cannot offset a deep truck recession on its own. The balance sheet is pristine, so this is not a solvency concern, the bear is purely about valuation and timing.
Valuation
The price sits above the evidence on every method, which is the defining feature of PACCAR's valuation today. The inversion implies the segment that carries the premium has to grow operating income roughly 16% a year, and no valuation family, asset, earnings, peer, or forward growth, reaches the current price. For a cyclical industrial, that pattern usually means one of two things: either the market is wrong, or the methods are anchored on trough earnings that understate the through-cycle picture. Here it is largely the latter. The trailing numbers reflect a soft truck market, so a normal multiple on a depressed earnings base produces a stock that screens expensive.
The honest reading requires separating the two businesses. The peer-multiple lens, anchored on an industrial-OEM cohort, reads the truck business as rich on current earnings; the parts business, with its near-30% gross margin and recurring revenue, would command a far higher multiple if valued on its own, closer to a consumer-staple annuity than a cyclical manufacturer. The blended methods cannot make that distinction, which is part of why they all land below the price. The forward-growth methods do not reach the quote either, but they are fed by recent negative revenue growth, the trough again, rather than a normalized recovery. The spread between price and methods is the market pricing a cyclical recovery the trailing-anchored models structurally cannot frame.
Solvency is the one place there is nothing to debate. The industrial business carries effectively no net debt, and the finance arm is funded and managed separately, so the company has full freedom to invest and return capital through the cycle. The recently raised regular dividend, on top of PACCAR's history of large special dividends, is the capital-return signal, and the share count is roughly flat. The street's mean target sits modestly above the current quote, crediting the second-half recovery this frame treats as the open question. The decisive figure is not the trailing multiple, it is the trajectory of North American truck deliveries into the 2027 pre-buy, because that is what turns a price that looks expensive on trough earnings into a reasonable one on normalized earnings.
Catalysts
PACCAR's first quarter of 2026, reported April 28, showed profit rising through a soft truck market. Net income was $605.3 million, up from $505.1 million a year earlier, on diluted earnings of $1.15 a share, even as truck, parts, and other revenue fell to $6.2 billion from $6.9 billion. The profit gain came from better mix, cost discipline, and the absence of a prior-year $350 million litigation charge. Deliveries were 33,100 vehicles, with second-quarter deliveries guided to 37,000 to 38,000 units.
PACCAR Parts was the standout, generating $1.7 billion of revenue and $402 million of profit at a 29.6% gross margin, while company-wide gross margin rose to 13.1% from 12% with second-quarter guidance near 13.5% on higher production volumes. The parts performance is the clearest evidence of the recurring, high-margin annuity that underpins the bull case.
The market outlook frames the second-half catalyst. Management estimates the U.S. and Canadian truck market at 230,000 to 270,000 units for the year and expects acceleration in the second half as fleet capacity tightens, freight rates improve, and customers buy ahead of the 2027 emissions change. The board raised the regular quarterly dividend to $0.35 a share from $0.33, with the company's customary special dividends typically declared later in the year. Analyst sentiment is a hold consensus with a mean target modestly above the quote. The figures to watch are deliveries and order intake into the pre-buy, and whether the parts annuity keeps growing through the truck trough.
Peer Cohorts (Per Segment, With Filing Citations)
Truck / Parts (reported)
- CAT (CATERPILLAR INC)
- (no filing in the citation store)
- DE (DEERE & CO)
- (no filing in the citation store)
- HON (Honeywell International Inc)
- (no filing in the citation store)
- EMR (EMERSON ELECTRIC CO.)
- (no filing in the citation store)
Financial Services (reported)
- ALLY (Ally Financial Inc.)
- (no filing in the citation store)
- COF (CAPITAL ONE FINANCIAL CORP)
- (no filing in the citation store)
- SYF (Synchrony Financial)
- (no filing in the citation store)
- OMF (ONEMAIN HOLDINGS, INC.)
- (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.
Sources
PCAR Q1 2026 earnings call, April 2026 · PCAR Q1 2026 earnings release, April 2026 · PCAR dividend declaration, 2026