Penske Automotive Group, Inc. (PAG): A Bull Case Theory

We came across a bullish thesis on Penske Automotive Group, Inc. on Compounding Dividends’s Substack by TJ Terwilliger. In this article, we will summarize the bulls’ thesis on PAG. Penske Automotive Group, Inc.'s share was trading at $164.72 as of January 13th. PAG’s trailing and forward P/E were 11.60 and 11.85 respectively according to Yahoo Finance.

Penske is one of the world’s largest automotive retailers and a leading international transportation services company, operating hundreds of dealerships across the U.S. and U.K., along with a substantial commercial truck segment and a significant stake in Penske Transportation Solutions. The company’s dealerships benefit from state laws that limit competition, creating protected local monopolies and a durable moat that shields profitability from external pressures.

While vehicle sales can be cyclical, Penske’s service and parts departments generate high-margin, recurring revenue, providing a steady cash flow buffer that is less sensitive to macroeconomic swings. This recurring revenue is increasingly valuable as vehicles become more technologically complex, reducing the likelihood of do-it-yourself maintenance and driving more customers back to specialized dealer service centers. Penske is thus uniquely positioned to capitalize on this structural trend, leveraging its scale, local market dominance, and service expertise to generate consistent, profitable growth.

The combination of recurring service revenue, commercial truck operations, and strategic investments in transportation solutions creates multiple avenues for financial upside. With these protective moats and secular tailwinds, Penske represents a compelling investment opportunity in the automotive retail and transportation services sectors, offering both stability through recurring revenue and potential growth through operational leverage and market consolidation. Investors can view Penske not just as a retailer of vehicles but as a resilient, multi-faceted platform benefiting from structural industry trends and local market protections, positioning the company for sustainable long-term value creation.

Previously, we covered a bullish thesis on Penske Automotive Group, Inc. (PAG) by Serhio MaxDividends in May 2025, which highlighted the company’s disciplined execution, strong operational momentum, and shareholder-friendly capital allocation across its global dealership and commercial truck operations. PAG's stock price has been flat since our coverage. The thesis still stands as PAG continues to generate resilient cash flow. TJ Terwilliger shares a similar view but emphasizes the structural moats from local dealership monopolies and recurring service revenue.

Penske Automotive Group, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 27 hedge fund portfolios held PAG at the end of the third quarter which was 26 in the previous quarter. While we acknowledge the potential of PAG as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.