Should You Invest in Penske Automotive Group?

OVERVIEW

Penske Automotive Group Incorporation is a company based in the United States. The company sells and leases new and used trucks around the world. The company also offers financial and maintenance services for these trucks as well. The company operates over 300 locations around the world where it sells and leases these trucks and services. The company was founded in 1990.

Why You Should?

  1. Penske is a great reopening play in an investor’s portfolio. The pandemic reduced the demand for trucks as the commercial and industrial economy shut down due to pandemic restrictions and a drop in demand. However, once this pandemic is over, the company will continue to see strong growth across all of its markets.
  2. Penske is a cheap investment option in an investor’s portfolio as well. The company currently trades at around 9.5 price to earnings (basically price to earnings per share or profit per share). This is an extremely low multiple and this means that the company’s stock price will remain stable and be less volatile when compared to the market.
  3. The company also offers a wide range of products to its customers. The company not only sells trucks to consumers, but it also sells financial, leasing, and maintenance services for these vehicles. This helps the company maintain “stickiness” or getting revenues from the same customers for a longer period of time. This wide range of products will benefit the company.

Why you Should Not?

  1. The company faces tough competition in the automotive industry. Some of these companies include U-Haul, J. B. Hunt, Swift, and many others. This competition might hurt the company and its investors in the future.
  2. The company operates with extremely small margins. Penske gets the bulk of its sales from selling and leasing trucks made by other companies (like Freightliner and Peterbilt). The company does not get too much profit from these operations. This might hurt the company if there are headwinds in the business.
  3. Penske relies on a strong economy to sell and lease more trucks to its customers. In a strong economy, companies will need trucks in order to transport goods around the nation and the world. However, in a weak economy, the demand for trucks decreases. This lack of safety might hurt the company and its investors.

MY OPINION

I think that Penske is a decent long-term investment due to its position as a good reopening play, its position as a safe investment option, as well as a wide range of products and services. However, tough competition, a lack of safety in its business, as well as small margins might hurt the company and its investors.

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