Critical Analysis: Volkswagen (OTC:VWAGY) vs. PACCAR (NASDAQ:PCAR)

Volkswagen (OTC:VWAGY) and PACCAR (NASDAQ:PCAR) are both large-cap auto/tires/trucks companies, but which is the superior stock? We will contrast the two businesses based on the strength of their earnings, dividends, institutional ownership, risk, profitability, analyst recommendations and valuation.

Valuation and Earnings

This table compares Volkswagen and PACCAR”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Volkswagen	$348.78 billion	0.16	$17.97 billion	$2.64	4.27
PACCAR	$33.66 billion	1.64	$4.16 billion	$7.91	13.28

Volkswagen has higher revenue and earnings than PACCAR. Volkswagen is trading at a lower price-to-earnings ratio than PACCAR, indicating that it is currently the more affordable of the two stocks.

Dividends

Volkswagen pays an annual dividend of $0.64 per share and has a dividend yield of 5.7%. PACCAR pays an annual dividend of $1.32 per share and has a dividend yield of 1.3%. Volkswagen pays out 24.2% of its earnings in the form of a dividend. PACCAR pays out 16.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Volatility & Risk

Volkswagen has a beta of 1.35, suggesting that its share price is 35% more volatile than the S&P 500. Comparatively, PACCAR has a beta of 0.92, suggesting that its share price is 8% less volatile than the S&P 500.

Institutional & Insider Ownership

64.9% of PACCAR shares are held by institutional investors. 2.0% of PACCAR shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares Volkswagen and PACCAR’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Volkswagen	3.77%	6.35%	1.96%
PACCAR	12.36%	23.53%	9.89%

Analyst Recommendations

This is a summary of current recommendations and price targets for Volkswagen and PACCAR, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Volkswagen	0	0	0	0	0.00
PACCAR	0	7	6	0	2.46

PACCAR has a consensus price target of $121.77, indicating a potential upside of 15.95%. Given PACCAR’s stronger consensus rating and higher possible upside, analysts clearly believe PACCAR is more favorable than Volkswagen.

Summary

PACCAR beats Volkswagen on 12 of the 16 factors compared between the two stocks.

About Volkswagen

Volkswagen AG manufactures and sells automobiles primarily in Europe, North America, South America, and the Asia-Pacific. The company operates in four segments: Passenger Cars and Light Commercial Vehicles, Commercial Vehicles, Power Engineering, and Financial Services. The Passenger Cars and Light Commercial Vehicles segment develops vehicles and engines, and light commercial vehicles; and produces and sells passenger cars and related parts. The Commercial Vehicles segment develops, produces, and sells trucks and buses; and offers parts and related services. The Power Engineering segment offers large-bore diesel engines, turbomachinery, special gear units, and propulsion components. The Financial Services segment provides dealer and customer financing, leasing, banking and insurance, fleet management, and mobility services. The company also offers motorcycles. It provides its products under the Volkswagen Passenger Cars, Audi, ŠKODA, SEAT, Bentley, Porsche, Volkswagen Commercial Vehicles, Scania, MAN, Lamborghini, Ducati, and Bugatti brands. Volkswagen AG was incorporated in 1937 and is based in Wolfsburg, Germany. Volkswagen AG operates as a subsidiary of Porsche Automobil Holding SE.

About PACCAR

PACCAR Inc designs, manufactures, and distributes light, medium, and heavy-duty commercial trucks in the United States, Canada, Europe, Mexico, South America, Australia, and internationally. It operates through three segments: Truck, Parts, and Financial Services. The Truck segment designs, manufactures, and distributes trucks for the over-the-road and off-highway hauling of commercial and consumer goods. It sells its trucks through a network of independent dealers under the Kenworth, Peterbilt, and DAF nameplates. The Parts segment distributes aftermarket parts for trucks and related commercial vehicles. The Financial Services segment conducts full-service leasing operations under the PacLease trade name, as well as provides finance and leasing products and services to customers and dealers. This segment also offers equipment financing and administrative support services for its franchisees; retail loan and leasing services for small, medium, and large commercial trucking companies, as well as independent owners/operators and other businesses; and truck inventory financing services to independent dealers. In addition, this segment offers loans and leases directly to customers for the acquisition of trucks and related equipment. The company also manufactures and markets industrial winches under the Braden, Carco, and Gearmatic nameplates. PACCAR Inc was founded in 1905 and is headquartered in Bellevue, Washington.