5 reasons paccar inc. stock is a strong buy now

5 Reasons Paccar Inc. Stock Is a Strong Buy Now

Image source: PACCAR

1 Solid earnings growth despite challenges

At record highsPaccar’s revenue and net income hit record

highs in 2015

Source: Paccar Q4 Investor Presentation.

Rising freight tonnage, lower fuel prices in the U.S.Strong housing and automotive marketsImproving demand from Europe, Paccar’s second-largest marketAggressive cost control: Selling, general, and administrative expenses declined 4% in 2015

What’s driving sales and profits

2 Growing market share

Substantial growth over the years

Source: Paccar Q4 Investor Presentation.

U.S./Canada heavy-duty truck market: 27.4%U.S./Canada medium-duty truck market: Record high at 17.4%Europe heavy-duty market: 14.6%, up from 13.8% last year

2015 market share

Brand nameInnovative leadershipExtensive dealership networkStrong aftermarket parts distribution businessFinancing and leasing services

What’s fueling Paccar’s growth

3 Strong cash flows and a solid balance sheet

Record operating cash flow in 2015

Source: Paccar Q4 Investor Presentation.

Free cash flow: $831 millionCash and short-term investments balance: $3.4 billionInterest coverage ratio: 19 timesReturn on equity: 23%

Other vital stats for 2015

4 Rapidly rising dividends

Dividends at record high

Source: Paccar Q4 Investor Presentation.

Paccar increased its quarterly dividend by 9% in 2015. Including a special dividend, total dividends per share grew 25% last year.Paccar has paid a dividend every year since 1941.The company also has an ongoing share repurchase program.

Facts you should know

5 Attractive valuation

At multiyear lows

Paccar is currently trading at less than 12 times trailing earnings and free cash flow. That’s an attractive bargain for the growth potential that the company offers.

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