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PACCAR Inc (PCAR) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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PACCAR Inc (PCAR)

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Intrinsic Value (DCF)

Current$121.92
→
Intrinsic$157.42
+29%
$99.82$157.42$271.94
Market implies 14% growth for 5 years
PCAR shows 29% potential upside using 20% growth — reasonable if fundamentals hold.
At $122, the market prices in 14% annual cash flow growth — a moderate expectation aligned with historical trends (20%).
Range: Bear $100 → Bull $272. Current price implies expectations below the base case, but well above the bear case.
Discount ↓Growth →16%18%20%22%
8%$202$220$240$261
10%$132$144$157$171
12%$95$104$114$124
14%$73$80$87$95

Bull Case

  • Bull case ($272) offers 123% upside at 24% growth, 8% discount
  • 23% margin of safety vs. base case estimate
  • Market-implied growth (14%) ≤ historical CAGR (20%)

Bear Case

  • Bear case ($100) implies 18% downside at 16% growth, 12% discount
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5-Year Free Cash Flow Projection

Year 1$3.47B
Year 2$4.17B
Year 3$5.00B
Year 4$6.00B
Year 5$7.20B
Terminal$114.16B

📐 Model Inputs

Growth Rate20.0%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate9.5%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$2.90BTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is PCAR stock undervalued or overvalued?
🟢 UNDERVALUED

PCAR trades at $121.92 vs. our DCF-derived intrinsic value of $157.42, implying +34% upside. At a 9.5% WACC and 20.0% projected FCF growth, the market appears to be underpricing the present value of PCAR's future cash flows. The bear case ($95.43) still suggests upside, providing margin of safety.

What is PCAR's intrinsic value?

Using a 5-year DCF model: Base FCF of $2.90B, projected at 20.0% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 9.5% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $8.83B net debt and dividing by 0.53B shares: Bear $95.43 | Base $157.42 | Bull $251.61. Current price $121.92 implies +34% to base case.

How is PCAR's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 20.0% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=9.5%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($91.73B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 31.7x.