4 min read
This story originally appeared on StockNews
With many auto stocks on fire over the past couple months, Patrick Ryan though it would interesting to compare Paccar (PCAR) and Cummins (CMI). PCAR sells trucks, while CMI makes engines. But which is the better buy now? Read more to find out.
Paccar (PCAR) and Cummins (CMI) are auto industry stocks with considerable potential. Both of these stocks have steadily increased over the past six months. Check out the charts for PCAR and CMI across the prior year, and you will find both ascended during that time as well.
Now that life is gradually returning to normal, the demand for vehicles and their components will increase. PCAR and CMI both stand to benefit from the return to normalcy as many more people will be hitting the road for travel, vacation, etc.
Will PCAR or CMI fare better than the other in the months ahead? Or will both of these stocks continue to ascend? Below, we attempt to answer these questions.
PCAR designs, makes, and distributes trucks. PCAR’s trucks are sold under brands such as Foden, Leyland, Peterbilt, and Kenworth. PCAR’s trucks include both on-road and off-road vehicles along with vehicles used for commercial purposes. PCAR currently trades at a forward P/E ratio of 15.98, a reasonable figure considering the stock is about $12 below its 52-week high of $103.19.
CMI designs, makes, and distributes engines, electric power systems, and components for engines. The company also services engines to boot. CMI is currently trading at a forward P/E ratio of 18.31. This forward P/E ratio is within reason, especially when you factor in CMI is priced about $22 below its 52-week high of $277.09.
PCAR and CMI According to Analysts
Analysts have established an average target price of $273.31 for CMI, meaning it has the potential to increase by more than 4%. The highest target price for the stock is $325, while its lowest is $235. Of the twenty-four analysts who have issued recommendations for the stock, sixteen consider it a Hold, four consider it a Buy, and four consider it a Strong Buy.
Analysts are bullish on PCAR, establishing an average target price of $99.44 for the stock. If PCAR rises to this level, it will have popped by 6.54%. The highest target price for the stock is $120, while its lowest is $80. Of the twenty analysts who have issued recommendations for PCAR, 12 consider it a Hold, four consider it a Strong Buy, two consider it a Buy, one considers it a Sell, and one rates it a Strong Sell.
PCAR and CMI POWR Ratings
CMI has an overall grade of B, which translates into a Buy rating in over POWR Ratings system. The stock has a grade of A in the Quality component and Cs in the Sentiment, Stability, and Momentum components. Investors who are curious as to how CMI fares in the Value and Growth components can find out by clicking here.
Of the 87 publicly traded companies in the A-rated Industrial – Machinery industry, CMI is ranked 21st. You can find other top stocks in this industry by clicking here.
PCAR is somewhat of a POWR Ratings disappointment with an overall grade of C, with a Neutral rating. PCAR has C grades in the Quality, Momentum, Value, and Sentiment components of the POWR Ratings. Investors who are curious about how PCAR fares in the remainder of the components such as Growth and Stability can find out by clicking here.
Out of the 53 publicly traded companies in the Auto & Vehicle manufacturers industry, PCAR is ranked 35th. Click here to find top stocks in this industry.
Which is the Better Buy?
CMI is the better play, largely because it has a better rating in the POWR Ratings and better component grades. Furthermore, CMI is ranked in the top quarter of the stocks in its industry. PCAR is ranked in the bottom half of its industry.
PCAR shares were trading at $90.75 per share on Friday morning, down $1.15 (-1.25%). Year-to-date, PCAR has gained 5.53%, versus a 12.15% rise in the benchmark S&P 500 index during the same period.
Paccar is a part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.