Is PACCAR (PCAR) Still a Buy After Strong Gains? A Deep Dive into Valuation and Growth Potential

PACCAR Inc. (PCAR) has long been a cornerstone of the commercial vehicle manufacturing sector, but as its stock price has surged in 2025, investors are asking: Is PCAR still a compelling buy? This analysis evaluates the company's valuation metrics and future growth prospects to determine whether the stock remains undervalued despite its recent gains.

Valuation Metrics: A Discount to Industry Peers

PACCAR's current valuation appears favorable when compared to industry averages. As of late December 2025, the company trades at a trailing twelve months (TTM) price-to-earnings (P/E) ratio of 21.81, significantly below the industry average of 28.32. Similarly, its price-to-book (P/B) ratio of 2.67 lags well behind the sector's 4.65, while its price-to-sales (P/S) ratio of 1.75 is nearly half the industry benchmark of 3.36 according to data. These metrics suggest that PACCAR is trading at a discount relative to both its book value and revenue, potentially signaling undervaluation.

The company's earnings power further strengthens its case. With a P/E ratio of 21.5x in some reports, PACCAR's valuation remains anchored to strong profitability. For context, a P/E ratio below the industry average often indicates investor skepticism about near-term growth or a mispricing of long-term potential. However, given PACCAR's robust financials and strategic initiatives, this discount may present an opportunity rather than a red flag.

Future Growth: Parts Division and EV Investments Drive Momentum

PACCAR's Parts division has emerged as a critical growth engine. In Q3 2025, the division reported record revenues of $1.72 billion, driven by surging demand for aftermarket parts and services. For the first nine months of 2025, the division generated $5.14 billion in revenue and $1.25 billion in pre-tax income, underscoring its role as a high-margin, stable cash flow generator. . To further capitalize on this momentum, PACCAR plans to open an 180,000 sq. ft. parts distribution center in Calgary, Canada, enhancing delivery efficiency and customer satisfaction according to company announcements.

Beyond its core operations, PACCAR is aggressively investing in electric vehicle (EV) technology. The company's Q2 2025 presentation outlined a comprehensive EV strategy, including the development of electric trucks across its Kenworth, Peterbilt, and DAF brands. A pivotal component of this strategy is its 30% stake in Amplify Cell Technologies, a $2–3 billion joint venture aimed at producing 21 GWh of battery capacity by 2027. These investments position PACCAR to capitalize on the global shift toward zero-emission transportation, a market expected to grow exponentially over the next decade.

Looking ahead, PACCAR plans to allocate $725–775 million to capital projects and $450–500 million to R&D in 2026 according to company plans. Such commitments highlight the company's dedication to innovation and its ability to adapt to evolving industry trends.

Analyst Sentiment and Price Targets

Analyst sentiment remains cautiously optimistic. While the consensus rating is a "Moderate Buy" with an average price target of $109.12 (compared to a current price of $111.63) according to market analysis, recent upgrades suggest stronger conviction. On December 19, 2025, JP Morgan upgraded PACCAR to "Overweight" from "Neutral" and raised its price target to $133 from $108, citing the company's strategic EV initiatives and strong Parts division performance. This upgrade reflects confidence in PACCAR's ability to outperform broader industry trends.

Conclusion: A Buy Despite Gains?

PACCAR's valuation metrics, while slightly elevated compared to historical levels, remain attractive relative to industry peers. Its Parts division provides a reliable cash flow foundation, while its EV investments position the company to lead in a transformative market. Analyst upgrades and strategic capital allocation further reinforce its growth potential.

For investors, the question is not whether PACCAR is overvalued but whether its long-term prospects justify the current price. Given its discounted valuation, strong operational performance, and forward-looking strategy, PACCAR remains a compelling buy-even after its 2025 gains.