Intrinsic value of Paccar - PCAR

Previous Close

$72.60

  Intrinsic Value

$76.58

stock screener

  Rating & Target

hold

+5%

  Value-price divergence*

+17%

Previous close

$72.60

 
Intrinsic value

$76.58

 
Up/down potential

+5%

 
Rating

hold

 
Value-price divergence*

+17%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of PCAR stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 25.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -10.89
  6.60
  6.44
  6.30
  6.17
  6.05
  5.94
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.18
  5.16
  5.14
  5.13
  5.11
  5.10
  5.09
  5.08
  5.08
Revenue, $m
  17,033
  18,157
  19,327
  20,543
  21,810
  23,130
  24,505
  25,938
  27,434
  28,994
  30,624
  32,326
  34,104
  35,964
  37,908
  39,942
  42,071
  44,299
  46,632
  49,076
  51,636
  54,318
  57,129
  60,075
  63,164
  66,403
  69,800
  73,362
  77,098
  81,018
  85,129
Variable operating expenses, $m
 
  7,444
  7,924
  8,423
  8,942
  9,483
  10,047
  10,635
  11,248
  11,888
  12,556
  13,254
  13,983
  14,745
  15,542
  16,376
  17,249
  18,163
  19,119
  20,121
  21,171
  22,270
  23,423
  24,631
  25,897
  27,225
  28,618
  30,078
  31,610
  33,217
  34,903
Fixed operating expenses, $m
 
  9,421
  9,656
  9,898
  10,145
  10,399
  10,659
  10,925
  11,198
  11,478
  11,765
  12,059
  12,361
  12,670
  12,987
  13,311
  13,644
  13,985
  14,335
  14,693
  15,061
  15,437
  15,823
  16,219
  16,624
  17,040
  17,466
  17,902
  18,350
  18,809
  19,279
Total operating expenses, $m
  15,945
  16,865
  17,580
  18,321
  19,087
  19,882
  20,706
  21,560
  22,446
  23,366
  24,321
  25,313
  26,344
  27,415
  28,529
  29,687
  30,893
  32,148
  33,454
  34,814
  36,232
  37,707
  39,246
  40,850
  42,521
  44,265
  46,084
  47,980
  49,960
  52,026
  54,182
Operating income, $m
  1,088
  1,292
  1,746
  2,223
  2,723
  3,248
  3,799
  4,378
  4,987
  5,628
  6,303
  7,013
  7,761
  8,549
  9,379
  10,255
  11,178
  12,151
  13,178
  14,262
  15,405
  16,611
  17,883
  19,226
  20,643
  22,138
  23,716
  25,381
  27,138
  28,992
  30,948
EBITDA, $m
  2,081
  2,344
  2,866
  3,413
  3,986
  4,588
  5,219
  5,881
  6,577
  7,308
  8,077
  8,885
  9,736
  10,632
  11,575
  12,568
  13,615
  14,718
  15,880
  17,105
  18,396
  19,757
  21,193
  22,706
  24,302
  25,985
  27,760
  29,631
  31,604
  33,685
  35,879
Interest expense (income), $m
  108
  297
  328
  362
  396
  432
  470
  509
  550
  592
  637
  683
  732
  782
  835
  890
  948
  1,009
  1,072
  1,139
  1,208
  1,281
  1,358
  1,438
  1,521
  1,609
  1,701
  1,798
  1,900
  2,006
  2,117
Earnings before tax, $m
  1,130
  995
  1,418
  1,861
  2,327
  2,815
  3,329
  3,869
  4,438
  5,036
  5,666
  6,330
  7,029
  7,766
  8,544
  9,364
  10,229
  11,142
  12,106
  13,123
  14,196
  15,329
  16,526
  17,788
  19,122
  20,529
  22,015
  23,583
  25,239
  26,986
  28,830
Tax expense, $m
  608
  269
  383
  503
  628
  760
  899
  1,045
  1,198
  1,360
  1,530
  1,709
  1,898
  2,097
  2,307
  2,528
  2,762
  3,008
  3,269
  3,543
  3,833
  4,139
  4,462
  4,803
  5,163
  5,543
  5,944
  6,367
  6,814
  7,286
  7,784
Net income, $m
  522
  727
  1,035
  1,359
  1,698
  2,055
  2,430
  2,825
  3,240
  3,676
  4,136
  4,621
  5,131
  5,669
  6,237
  6,836
  7,467
  8,134
  8,837
  9,580
  10,363
  11,190
  12,064
  12,986
  13,959
  14,986
  16,071
  17,216
  18,424
  19,700
  21,046

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3,057
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  20,639
  18,738
  19,945
  21,201
  22,508
  23,869
  25,288
  26,768
  28,311
  29,922
  31,603
  33,360
  35,195
  37,114
  39,121
  41,220
  43,417
  45,716
  48,124
  50,646
  53,288
  56,056
  58,957
  61,997
  65,185
  68,528
  72,033
  75,709
  79,565
  83,609
  87,853
Adjusted assets (=assets-cash), $m
  17,582
  18,738
  19,945
  21,201
  22,508
  23,869
  25,288
  26,768
  28,311
  29,922
  31,603
  33,360
  35,195
  37,114
  39,121
  41,220
  43,417
  45,716
  48,124
  50,646
  53,288
  56,056
  58,957
  61,997
  65,185
  68,528
  72,033
  75,709
  79,565
  83,609
  87,853
Revenue / Adjusted assets
  0.969
  0.969
  0.969
  0.969
  0.969
  0.969
  0.969
  0.969
  0.969
  0.969
  0.969
  0.969
  0.969
  0.969
  0.969
  0.969
  0.969
  0.969
  0.969
  0.969
  0.969
  0.969
  0.969
  0.969
  0.969
  0.969
  0.969
  0.969
  0.969
  0.969
  0.969
Average production assets, $m
  5,724
  6,101
  6,494
  6,903
  7,328
  7,772
  8,234
  8,715
  9,218
  9,742
  10,290
  10,861
  11,459
  12,084
  12,737
  13,421
  14,136
  14,884
  15,668
  16,489
  17,350
  18,251
  19,195
  20,185
  21,223
  22,311
  23,453
  24,650
  25,905
  27,222
  28,604
Working capital, $m
  11,070
  8,534
  9,083
  9,655
  10,251
  10,871
  11,517
  12,191
  12,894
  13,627
  14,393
  15,193
  16,029
  16,903
  17,817
  18,773
  19,773
  20,821
  21,917
  23,066
  24,269
  25,529
  26,851
  28,235
  29,687
  31,209
  32,806
  34,480
  36,236
  38,078
  40,011
Total debt, $m
  8,475
  9,380
  10,330
  11,320
  12,350
  13,423
  14,541
  15,707
  16,923
  18,192
  19,517
  20,901
  22,348
  23,860
  25,441
  27,095
  28,826
  30,638
  32,536
  34,523
  36,605
  38,786
  41,072
  43,468
  45,980
  48,614
  51,376
  54,272
  57,311
  60,498
  63,842
Total liabilities, $m
  13,861
  14,766
  15,716
  16,706
  17,736
  18,809
  19,927
  21,093
  22,309
  23,578
  24,903
  26,287
  27,734
  29,246
  30,827
  32,481
  34,212
  36,024
  37,922
  39,909
  41,991
  44,172
  46,458
  48,854
  51,366
  54,000
  56,762
  59,658
  62,697
  65,884
  69,228
Total equity, $m
  6,778
  3,972
  4,228
  4,495
  4,772
  5,060
  5,361
  5,675
  6,002
  6,343
  6,700
  7,072
  7,461
  7,868
  8,294
  8,739
  9,204
  9,692
  10,202
  10,737
  11,297
  11,884
  12,499
  13,143
  13,819
  14,528
  15,271
  16,050
  16,868
  17,725
  18,625
Total liabilities and equity, $m
  20,639
  18,738
  19,944
  21,201
  22,508
  23,869
  25,288
  26,768
  28,311
  29,921
  31,603
  33,359
  35,195
  37,114
  39,121
  41,220
  43,416
  45,716
  48,124
  50,646
  53,288
  56,056
  58,957
  61,997
  65,185
  68,528
  72,033
  75,708
  79,565
  83,609
  87,853
Debt-to-equity ratio
  1.250
  2.360
  2.440
  2.520
  2.590
  2.650
  2.710
  2.770
  2.820
  2.870
  2.910
  2.960
  3.000
  3.030
  3.070
  3.100
  3.130
  3.160
  3.190
  3.220
  3.240
  3.260
  3.290
  3.310
  3.330
  3.350
  3.360
  3.380
  3.400
  3.410
  3.430
Adjusted equity ratio
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  522
  727
  1,035
  1,359
  1,698
  2,055
  2,430
  2,825
  3,240
  3,676
  4,136
  4,621
  5,131
  5,669
  6,237
  6,836
  7,467
  8,134
  8,837
  9,580
  10,363
  11,190
  12,064
  12,986
  13,959
  14,986
  16,071
  17,216
  18,424
  19,700
  21,046
Depreciation, amort., depletion, $m
  993
  1,052
  1,120
  1,190
  1,263
  1,340
  1,420
  1,503
  1,589
  1,680
  1,774
  1,873
  1,976
  2,083
  2,196
  2,314
  2,437
  2,566
  2,701
  2,843
  2,991
  3,147
  3,310
  3,480
  3,659
  3,847
  4,044
  4,250
  4,466
  4,693
  4,932
Funds from operations, $m
  3,007
  1,778
  2,155
  2,549
  2,962
  3,395
  3,850
  4,327
  4,829
  5,356
  5,910
  6,493
  7,107
  7,753
  8,433
  9,150
  9,905
  10,700
  11,539
  12,423
  13,355
  14,337
  15,373
  16,466
  17,618
  18,833
  20,114
  21,466
  22,891
  24,393
  25,978
Change in working capital, $m
  706
  528
  550
  572
  595
  620
  646
  674
  703
  733
  766
  800
  836
  874
  914
  956
  1,000
  1,047
  1,097
  1,148
  1,203
  1,261
  1,321
  1,385
  1,452
  1,522
  1,596
  1,674
  1,756
  1,842
  1,933
Cash from operations, $m
  2,301
  1,250
  1,605
  1,977
  2,367
  2,775
  3,204
  3,653
  4,126
  4,622
  5,144
  5,693
  6,271
  6,879
  7,519
  8,194
  8,904
  9,653
  10,442
  11,274
  12,151
  13,076
  14,052
  15,081
  16,166
  17,311
  18,518
  19,791
  21,134
  22,551
  24,045
Maintenance CAPEX, $m
  0
  -987
  -1,052
  -1,120
  -1,190
  -1,263
  -1,340
  -1,420
  -1,503
  -1,589
  -1,680
  -1,774
  -1,873
  -1,976
  -2,083
  -2,196
  -2,314
  -2,437
  -2,566
  -2,701
  -2,843
  -2,991
  -3,147
  -3,310
  -3,480
  -3,659
  -3,847
  -4,044
  -4,250
  -4,466
  -4,693
New CAPEX, $m
  -1,965
  -377
  -393
  -409
  -426
  -443
  -462
  -482
  -502
  -524
  -547
  -572
  -598
  -625
  -653
  -683
  -715
  -749
  -784
  -821
  -860
  -901
  -944
  -990
  -1,038
  -1,088
  -1,141
  -1,197
  -1,255
  -1,317
  -1,382
Cash from investing activities, $m
  -1,564
  -1,364
  -1,445
  -1,529
  -1,616
  -1,706
  -1,802
  -1,902
  -2,005
  -2,113
  -2,227
  -2,346
  -2,471
  -2,601
  -2,736
  -2,879
  -3,029
  -3,186
  -3,350
  -3,522
  -3,703
  -3,892
  -4,091
  -4,300
  -4,518
  -4,747
  -4,988
  -5,241
  -5,505
  -5,783
  -6,075
Free cash flow, $m
  737
  -114
  160
  448
  751
  1,068
  1,402
  1,752
  2,121
  2,509
  2,917
  3,347
  3,801
  4,279
  4,783
  5,314
  5,875
  6,467
  7,092
  7,752
  8,448
  9,184
  9,961
  10,781
  11,648
  12,563
  13,530
  14,551
  15,629
  16,768
  17,970
Issuance/(repayment) of debt, $m
  47
  905
  951
  990
  1,030
  1,073
  1,118
  1,166
  1,216
  1,269
  1,325
  1,384
  1,446
  1,512
  1,581
  1,654
  1,731
  1,812
  1,897
  1,987
  2,082
  2,181
  2,286
  2,396
  2,512
  2,634
  2,762
  2,897
  3,038
  3,187
  3,344
Issuance/(repurchase) of shares, $m
  -71
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  5
  905
  951
  990
  1,030
  1,073
  1,118
  1,166
  1,216
  1,269
  1,325
  1,384
  1,446
  1,512
  1,581
  1,654
  1,731
  1,812
  1,897
  1,987
  2,082
  2,181
  2,286
  2,396
  2,512
  2,634
  2,762
  2,897
  3,038
  3,187
  3,344
Total cash flow (excl. dividends), $m
  728
  791
  1,111
  1,438
  1,781
  2,141
  2,520
  2,918
  3,337
  3,778
  4,242
  4,731
  5,247
  5,791
  6,364
  6,968
  7,606
  8,279
  8,989
  9,739
  10,530
  11,365
  12,247
  13,177
  14,160
  15,197
  16,292
  17,448
  18,668
  19,955
  21,314
Retained Cash Flow (-), $m
  162
  -251
  -256
  -266
  -277
  -289
  -301
  -314
  -327
  -341
  -356
  -372
  -389
  -407
  -425
  -445
  -466
  -488
  -510
  -535
  -560
  -587
  -615
  -645
  -676
  -709
  -743
  -779
  -817
  -858
  -900
Prev. year cash balance distribution, $m
 
  3,057
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  3,596
  856
  1,172
  1,504
  1,853
  2,219
  2,604
  3,010
  3,436
  3,886
  4,359
  4,858
  5,384
  5,938
  6,523
  7,140
  7,792
  8,479
  9,204
  9,970
  10,778
  11,632
  12,533
  13,484
  14,489
  15,549
  16,668
  17,850
  19,098
  20,414
Discount rate, %
 
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
  25.93
PV of cash for distribution, $m
 
  3,383
  753
  958
  1,135
  1,281
  1,395
  1,477
  1,526
  1,543
  1,529
  1,488
  1,423
  1,336
  1,234
  1,119
  997
  872
  748
  630
  519
  420
  332
  256
  193
  142
  102
  71
  48
  32
  20
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

PACCAR Inc (PACCAR) is a technology company. The Company's segments include Truck, Parts and Financial Services. The Truck segment includes the design, manufacture and distribution of light-, medium- and heavy-duty commercial trucks. The Company's trucks are marketed under the Kenworth, Peterbilt and DAF nameplates. It also manufactures engines, primarily for use in the Company's trucks, at its facilities in Columbus, Mississippi; Eindhoven, the Netherlands, and Ponta Grossa, Brazil. The Parts segment includes the distribution of aftermarket parts for trucks and related commercial vehicles. The Financial Services segment includes finance and leasing products and services provided to customers and dealers. Its Other business includes the manufacturing and marketing of industrial winches. The Company operates in Australia and Brazil and sells trucks and parts to customers in Asia, Africa, Middle East and South America.

FINANCIAL RATIOS  of  Paccar (PCAR)

Valuation Ratios
P/E Ratio 48.8
Price to Sales 1.5
Price to Book 3.8
Price to Tangible Book
Price to Cash Flow 11.1
Price to Free Cash Flow 75.8
Growth Rates
Sales Growth Rate -10.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 13.9%
Cap. Spend. - 3 Yr. Gr. Rate 1%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 125%
Total Debt to Equity 125%
Interest Coverage 11
Management Effectiveness
Return On Assets 2.7%
Ret/ On Assets - 3 Yr. Avg. 5.9%
Return On Total Capital 3.4%
Ret/ On T. Cap. - 3 Yr. Avg. 7.7%
Return On Equity 7.6%
Return On Equity - 3 Yr. Avg. 17.1%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 19.7%
Gross Margin - 3 Yr. Avg. 19%
EBITDA Margin 13.1%
EBITDA Margin - 3 Yr. Avg. 15.6%
Operating Margin 6.4%
Oper. Margin - 3 Yr. Avg. 9.7%
Pre-Tax Margin 6.6%
Pre-Tax Margin - 3 Yr. Avg. 9.8%
Net Profit Margin 3.1%
Net Profit Margin - 3 Yr. Avg. 6.2%
Effective Tax Rate 53.8%
Eff/ Tax Rate - 3 Yr. Avg. 39.3%
Payout Ratio 158.8%

PCAR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PCAR stock intrinsic value calculation we used $17033 million for the last fiscal year's total revenue generated by Paccar. The default revenue input number comes from 2016 income statement of Paccar. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our PCAR stock valuation model: a) initial revenue growth rate of 6.6% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 6.3%, whose default value for PCAR is calculated based on our internal credit rating of Paccar, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Paccar.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of PCAR stock the variable cost ratio is equal to 41%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $9191 million in the base year in the intrinsic value calculation for PCAR stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Paccar.

Corporate tax rate of 27% is the nominal tax rate for Paccar. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the PCAR stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for PCAR are equal to 33.6%.

Life of production assets of 5.8 years is the average useful life of capital assets used in Paccar operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for PCAR is equal to 47%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $6778 million for Paccar - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 352.445 million for Paccar is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Paccar at the current share price and the inputted number of shares is $25.6 billion.

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PAG Penske Automot 45.62 33.91  hold

COMPANY NEWS

▶ Machinery: Buy Caterpillar, United Rentals; Skip Paccar   [Oct-11-17 09:47AM  Barrons.com]
▶ ETFs with exposure to PACCAR, Inc. : October 5, 2017   [Oct-05-17 11:15AM  Capital Cube]
▶ GM and Ford beat sales expectations   [Oct-03-17 10:25AM  Yahoo Finance Video]
▶ ETFs with exposure to PACCAR, Inc. : September 25, 2017   [Sep-25-17 10:43AM  Capital Cube]
▶ Stocks Generating Improved Relative Strength: Paccar   [Sep-19-17 03:00AM  Investor's Business Daily]
▶ ETFs with exposure to PACCAR, Inc. : September 14, 2017   [Sep-14-17 06:54PM  Capital Cube]
▶ PACCAR Declares Regular Quarterly Cash Dividend   [Sep-12-17 01:01PM  Business Wire]
▶ ETFs with exposure to PACCAR, Inc. : July 27, 2017   [Jul-27-17 02:25PM  Capital Cube]
▶ Paccar beats Street 2Q forecasts   [Jul-25-17 04:56PM  Associated Press]
▶ ETFs with exposure to PACCAR, Inc. : July 17, 2017   [Jul-17-17 01:50PM  Capital Cube]
▶ PACCAR Declares Regular Quarterly Cash Dividend   [Jul-11-17 09:40AM  Business Wire]
▶ ETFs with exposure to PACCAR, Inc. : July 5, 2017   [Jul-05-17 01:04PM  Capital Cube]
▶ PACCAR, Inc. Value Analysis (NASDAQ:PCAR) : June 19, 2017   [Jun-19-17 05:06PM  Capital Cube]
▶ PACCAR Recognizes Supplier Quality Award Winners   [Jun-15-17 01:00PM  Business Wire]
▶ ETFs with exposure to PACCAR, Inc. : June 8, 2017   [Jun-08-17 01:51PM  Capital Cube]
▶ PACCAR Stock Upgraded: What You Need to Know   [Jun-06-17 02:23PM  Motley Fool]
▶ ETFs with exposure to PACCAR, Inc. : May 22, 2017   [May-22-17 02:00PM  Capital Cube]
▶ 3 Growth Stocks for Astute Investors   [May-10-17 09:31AM  Motley Fool]
▶ ETFs with exposure to PACCAR, Inc. : May 9, 2017   [May-09-17 04:56PM  Capital Cube]
▶ PACCAR Introduces Proprietary Front Axle in North America   [May-08-17 12:57PM  Business Wire]
▶ 3 Top Industrial Stocks' Earnings to Watch This Week   [Apr-30-17 08:07AM  Motley Fool]
▶ PACCAR Inc. Slows Down, but Keeps Driving Forward   [Apr-28-17 10:07AM  Motley Fool]
▶ PACCAR Increases Regular Quarterly Cash Dividend   [Apr-25-17 05:10PM  Business Wire]
▶ Paccar meets 1Q profit forecasts   [08:14AM  Associated Press]
▶ 3 Reasons Tesla Wants to Sell Trucks Too   [Apr-20-17 10:48AM  Barrons.com]
▶ Trucks to hit Tesla roadblock?   [Apr-18-17 05:18PM  CNBC Videos]
▶ Self-Driving Cars May Just Be the Start   [Mar-26-17 02:00PM  Oilprice.com]
Financial statements of PCAR
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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