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When Should You Buy PACCAR Inc (NASDAQ:PCAR)?

Simply Wall St

PACCAR Inc (NASDAQ:PCAR) received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$82.95 at one point, and dropping to the lows of US$55.75. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether PACCAR's current trading price of US$55.75 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at PACCAR’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for PACCAR

What is PACCAR worth?

According to my valuation model, PACCAR seems to be fairly priced at around 17.22% above my intrinsic value, which means if you buy PACCAR today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth $47.56, then there isn’t really any room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since PACCAR’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from PACCAR?

NasdaqGS:PCAR Past and Future Earnings, March 19th 2020

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of PACCAR, it is expected to deliver a negative earnings growth of -5.7%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? Currently, PCAR appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on PCAR for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on PCAR should the price fluctuate below its true value.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on PACCAR. You can find everything you need to know about PACCAR in the latest infographic research report. If you are no longer interested in PACCAR, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.