Is PACCAR, Inc. overvalued or undervalued?

As of 1 May 2025, PACCAR, Inc. has moved from a valuation grade of very expensive to expensive. The company is currently considered overvalued based on its financial metrics. The P/E ratio stands at 14, while the industry average P/E is significantly higher, with peers like Caterpillar, Inc. at 26.12 and Cummins, Inc. at 23.76. Additionally, PACCAR's EV to EBITDA ratio of 10.20 is lower than the industry average, indicating a potential mispricing relative to its earnings potential.
Despite the attractive dividend yield of 4.54% and strong return metrics, such as a ROCE of 18.32% and ROE of 19.25%, the overall valuation suggests that PACCAR is not a compelling investment at its current price of 91.75. The company's recent stock performance has lagged behind the S&P 500, with a year-to-date return of -11.80% compared to the index's 2.44%, reinforcing the notion that PACCAR is overvalued in the current market environment.