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Penske Automotive Group Inc PAG Stock Quote

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Morningstar‘s Stock Analysis PAG

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We See Penske With a Long Growth Runway in Light Vehicles and Trucks While Also Repurchasing Shares

Business Strategy and Outlook

| David Whiston, CFA, CPA, CFE |

Penske Automotive Group receives over 90% of its light-vehicle dealer revenue from import and luxury brands. This percentage is significantly higher than many dealers and helps mitigate the cyclical nature of auto sales; these brands have more-affluent customers who will not limit their discretionary spending during a downturn. Despite this wealthy customer, the firm's operating margin tends to be on the lower end of the publicly traded dealers. Penske gets less of its gross profit from higher-margin finance and insurance commissions than its peers, and selling, general, and administrative expenses (including rent expense) as a percentage of gross profit are higher than the other public dealers. Penske cannot get as much finance business--a 100% gross margin business--as its peers because more of its customers lease vehicles or pay cash. When excluding rent, Penske's SG&A ratio is competitive.

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Business Description

Penske Automotive Group operates in about 20 U.S. states and overseas. It has 152 U.S. light-vehicle stores including in Puerto Rico as well as 180 franchised dealerships overseas, primarily in the United Kingdom. The company is the second-largest U.S.-based dealership in terms of light-vehicle revenue and sells more than 35 brands, with over 90% of retail automotive revenue coming from luxury and import names. Other services, in addition to new and used vehicles, are parts and repair and finance and insurance. The firm's Premier Truck Group owns 39 truck dealerships selling mostly Freightliner and Western Star brands, and Penske owns 21 CarShop used-vehicle stores in the U.S. and U.K. The company is based in Michigan and was called United Auto Group before changing its name in 2007.

2555 Telegraph Road
Bloomfield Hills, MI, 48302-0954
T +1 248 648-2500
Industry Auto & Truck Dealerships
Most Recent Earnings Jun 30, 2022
Fiscal Year End Dec 31, 2022
Employees 26,000

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