PCAR 3Q23: Looking toppy (incl. Excel workbook)
The company seems to have reached a cyclical top which does not appear to be priced in sufficiently. I see about 40% downside potential with limited upside risk.
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If you are looking for a cyclical company that is proving that the rumors about resilient economic growth are true, you can find it by looking at PACCAR PCAR 0.00%↑. They released their 3Q23 earnings yesterday and they are blowing it out of the park with $8.7bn in revenues for the quarter (+23% year-over-year) and $2.34 EPS (+59% year-over-year). For 9M23 revenues are up 26% and EPS is up 52% vs. prior year. The stock is up 30% this year and 60% from summer 2022.
‘Sell the news’ is an important trading principle. I believe this one is ripe for a correction. In this article, I will quantify the bear case. I have also attached my Excel workbook at the end.
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The valuation of a truck manufacturer is simple: volume times price times margin times multiple. Let’s look at each of those to build a valuation opinion.
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