Shares of semi-truck maker PACCAR (NASDAQ:PCAR) are tumbling in Tuesday trading, down about 3% already, despite the fact that the company appears to have beaten analyst estimates for both revenues and earnings quite handily.

But why? After all, in this morning Q1 earnings report, the maker of famed truck brands such as DAF, Kenworth, and Peterbilt reported:

  • Growing "trucks, parts, and other" revenues a respectable 12.5%, to $4.1 billion -- comfortably ahead of estimates even before adding $294 million in financial services revenues
  • Expanding its operating profit margin on this business by 80 basis points, to 7.7%
  • Earning $0.77 per diluted share, a penny more than it was expected to produce -- and a dime more than PACCAR earned in last year's Q1

What's not to like about all that?

A couple of things to not like
Reading past the headline numbers, however, all's not quite as good as it may seem at PACCAR. Notably, cash profits generated in the year's first quarter (free cash flow) amounted to only $205.4 million -- down 14% in comparison to last year's fiscal first quarter, as deep cuts in capital spending weren't enough to offset a steep decline in cash provided by operations. PACCAR's FCF number also suggests that the "quality of earnings" in this year's Q1 might not be quite up to snuff.

A second reason for investors to worry about the stock -- and perhaps take some profits off the table after the stock's 32% run-up over the past year -- might be its rather high valuation. Based on its latest numbers, PACCAR shares now cost roughly 19 times trailing earnings. For a stock with only a 1.2% dividend yield, and only a 13.5% projected earnings growth rate, that's a rather steep valuation.

Plus, there's at least the potential for PACCAR to grow less swiftly than it's expected to. Forecasting annual sales of its big trucks in markets around the globe, PACCAR warned of the potential for a pretty steep fall-off in sales of 16-ton-plus trucks in Europe this year (where PACCAR projects about a 11% contraction in industry-wide demand). Growth in Class 8 trucks sold in the U.S. and Canada (projected at about 8% for the industry) could help offset this, but down south in Brazil, the likelihood is that 6-ton-plus truck sales will also slide somewhat.

Foolish takeaway
PACCAR is a quality shop, and far from the most expensive stock on the market today. But with earnings growth too low to support its pricey valuation -- and the potential to go lower -- I suspect there are better places to put your money to work, than PACCAR.

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The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term -- but in addition to sporting a pricey stock, PACCAR only pays its shareholders 1.2%. That's not a lot, and smart investors can do better. A well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

Rich Smith has no position in any stocks mentioned, and doesn't always agree with his fellow Fools. Case in point: The Motley Fool still recommends (and owns) shares of Paccar. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.