Saturday, January 07, 2006

PACCAR (PCAR) Analysis

Paccar is a stock that is recommended by the Fools. ( ). Paccar is in the heavy truck manufacturing business and has been doing quite well in that industry. In this segment, we will analyze Paccar's balance sheets and see if the stock is worth investing in 2006.

MorningStar ( ) has a good stock analysis page that allows us to analyze the past earnings and financial statements of this stock. Let us look at some of the interesting ratios. The dividend growth in the past five years has averaged 10.9% and PCAR has a history of paying out dividends for the last forty years. However, the increase in dividends is marked by great increase in revenues and profits since 2001 which was a sequential down year for the stock. The revenues have increased from 4848 million dollars to 13612 million dollars in 2005 which is impressive. 2000 and 2001 were down years for PCAR on a sequential revenue growth point of view because of the world wide down turn following the dot com bust. Cash flow has also been increasing year over year but for a decline in 2000.

The SEC site shows the most recent quarter's results for PACCAR. The quarter was a strong one for PACCAR which has presence in the Americas, Europe and Asia with increase in revenues from all the locations. Revenues increased 20% year over year for PACCAR. The total number of outstanding shares in PACCAR has also decreased year over year by 3.3 million. This will contribute to earnings per share and dividends per share in the current year. So although the revenues increased by 20% year over year, earnings increased by 26% year over year. Stock holders equity also increased 7% year over year.

For 2006-2010, things should continue to look up for Paccar as world wide economic growth continues. Paccar is a well managed company and has a strong balance sheet. The stock had a down year in 2005 but has already posted 4.6% gain this year. The dividend growth is unlikely to keep its 10.9% growth rate in the future as the main contributing factor for the dividend growth has been one time special dividends. The forward P/E is also pretty attractive compared to S&P500 at around 10. So long as the economic growth remains strong around the world, demand for Paccar trucks will continue to grow.

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