both show consistent growth over the years. So do the ratios, return on assets and return on equity. Liquidity ratios also look good. Paccar’s average collection period, is below the industry average, and except for 1996 when collections averaged over 44 days, Paccar’s average collections have declined from the 44.6 days in 1996, to 32 days in 1997, 28 days in 1998 and 23 days in 1999. This shows extremely good effort at managing its receivables.Debt management also looks good. Paccar’s debt ratio and its long-term debt to equity ratio are either at industry norms or considerably below them.The one area that begs further study is inventory turnover. Within the asset management category, Paccar’s inventory turnover ratio has been, not only above, but towers above the industry. With an industry turnover ratio of 6.4 times, Paccar has managed an inventory turnover of 16.5 times in 1995, 9.19 times in 1996, 14.1 times in 1997, 12.6 in 1998 and a phenomenal 18.94 times in 1999. Whatever is causing this tremendous positive inventory ratio figure to occur merits further study and analysis.Concluding RemarksWe have come to the conclusion that Paccar has tremendous fundamentals. However, Paccar’s inventory levels, and its very high inventory turnover ratio, merit further study. From Table 5, one can see that despite Paccar’s robust and consistently above industry average figures, Paccar’s multiples are below industry average. Paccar’s Price to earnings per share figure (P/E) at 7.5 times is well below the industry’s 12.5 times. In fact, this is not just a one-year anomaly. Paccar’s 5-year P/E growth at 0.20 is considerably below the industry's more robust 0.80 figure.Some of this anomaly may be due to the family influence. While keeping it in the family maintains consistency and a long-term vision, the fact that the Pigott family controls over 50% of Paccar’s common s...
