How Does Parker-Hannifin Stack Up After Its 36.9% Run and Latest Acquisitions?
- Curious whether Parker-Hannifin is still a good value after its strong run? You are not alone, as this stock is on a lot of investors’ watchlists right now.
- Parker-Hannifin’s stock has surged 36.9% year-to-date and is up 23.8% over the last year, reflecting renewed optimism and perhaps shifting risk perceptions in the industrial sector.
- Fueling this momentum, Parker-Hannifin has recently featured in headlines about strategic acquisitions and advancements in its motion and control technologies. Both of these developments have captured Wall Street’s attention. Industry commentators have also highlighted its decisive moves into electrification and automation solutions, adding more excitement to the story.
- As for valuation, Parker-Hannifin currently scores a 1 out of 6 on our value checks, signaling some caution. In the next sections, we will break down how different valuation approaches frame the company’s value today, and at the end, explore a unique way to think about what the numbers can really tell us.
Parker-Hannifin scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
Approach 1: Parker-Hannifin Discounted Cash Flow (DCF) Analysis
The Discounted Cash Flow (DCF) approach estimates a company's intrinsic value by forecasting its future cash flows and discounting them back to today. This reflects the present value of those future profits and is particularly helpful for understanding whether the stock’s current price reflects its long-term earnings potential.
For Parker-Hannifin, analysts estimate the company's Free Cash Flow for the last twelve months at about $3.4 Billion. Looking ahead, projections show FCF steadily growing, reaching about $4.9 Billion by 2029. The DCF model combines these analyst forecasts and extends the estimates another five years into the future, showing continued modest growth into the next decade.
After discounting all these future cash flows using a standard 2 Stage Free Cash Flow to Equity model, the result is an intrinsic share value of $661.90. This is approximately 30.2% lower than Parker-Hannifin’s current stock price, meaning that based on these cash flow assumptions, the stock appears to be overvalued relative to its calculated fair value today.
Result: OVERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Parker-Hannifin may be overvalued by 30.2%. Discover 914 undervalued stocks or create your own screener to find better value opportunities.
Approach 2: Parker-Hannifin Price vs Earnings
The Price-to-Earnings (PE) ratio is widely used for valuing profitable companies because it links the company’s stock price to its per-share earnings. For investors, PE is an easy way to compare how much they are paying for a dollar of a company’s actual profits. This makes it especially relevant for stable, cash-generating firms like Parker-Hannifin.
What constitutes a “normal” or “fair” PE ratio varies with expected growth and risk. High-growth companies or those perceived as lower risk often justify a higher PE. Slower growers or riskier firms tend to trade at a lower multiple. The context of industry norms and broader market conditions also shapes what is reasonable at any time.
Currently, Parker-Hannifin trades at a PE ratio of 29.86x. This sits above the Machinery industry average of around 24.88x, but is just below its peer group average of 35.99x. However, Simply Wall St’s “Fair Ratio” for Parker-Hannifin is estimated at 29.75x. This proprietary metric is designed to better capture important factors like the company’s earnings growth profile, profit margins, market cap, industry, and company-specific risks.
Unlike simple peer or industry comparisons, the Fair Ratio uses a broader view by considering not just where Parker-Hannifin fits among competitors, but also underlying strengths or vulnerabilities that could affect what investors should pay for its earnings.
With the current PE of 29.86x only slightly above the Fair Ratio of 29.75x, Parker-Hannifin’s shares are priced about right based on this approach.
Result: ABOUT RIGHT
PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1437 companies where insiders are betting big on explosive growth.
Upgrade Your Decision Making: Choose your Parker-Hannifin Narrative
Earlier we mentioned that there's an even better way to understand valuation. Let's introduce you to Narratives. A Narrative is a simple, powerful tool that lets you tell the story behind the numbers through your personal view of a company's future, including your assumptions for revenue, earnings, and profit margins. Narratives connect what you believe about Parker-Hannifin's business to a specific financial forecast and a calculated fair value. This approach makes your perspective clear and actionable.
Accessible within the Simply Wall St Community page, Narratives help millions of investors compare their own Fair Value estimate to the current market price. As new information such as news, acquisitions, or earnings updates arrives, Narratives update automatically so your analysis remains relevant. For example, some investors currently see Parker-Hannifin’s fair value as high as $900 per share, factoring in robust automation demand and efficiency gains. Others set a more cautious target near $500 due to concerns about aerospace reliance and acquisition risks. With Narratives, you no longer just track the numbers—you give them meaning and context, empowering you to invest with conviction.
Do you think there's more to the story for Parker-Hannifin? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com