Does the Rally in Powell Industries Shares Align With Its Fundamental Value in 2025?

• Thinking about whether Powell Industries might be a bargain? If you have ever wondered what really makes a stock “cheap” or “expensive,” you are in good company.
• Shares have taken a breather over the past week, dipping 1.1%, but they have soared an impressive 66.2% year-to-date and more than 1400% over the past three years. This suggests big shifts in investor sentiment.
• Much of this strong performance comes from supply chain improvements and recent contract wins in the energy sector, which are injecting momentum into the company’s outlook. Headlines have highlighted how Powell Industries is capitalizing on infrastructure spending and capturing new projects, which may be driving increased interest from both institutional and retail investors.
• Before jumping straight to conclusions, it is worth noting that Powell Industries currently scores 2 out of 6 on our undervaluation checks. We will break down what this means using standard valuation approaches. There is also a smarter way of looking at value that investors should not miss.

Powell Industries scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Powell Industries Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's value by projecting its future free cash flows and discounting them back to their present value. This gives investors a sense of what the business is fundamentally worth today, based on its ability to generate cash in the years ahead.

For Powell Industries, the most recent free cash flow was $88.02 million. Analysts have provided estimates for the next five years, with free cash flow projected to reach $149 million by 2030. After these years, Simply Wall St extrapolates further growth, using industry and company trends for the outlook as far as 2035. All cash flow figures are given in USD.

Using these forecasts and the 2 Stage Free Cash Flow to Equity model, the DCF analysis places the intrinsic value per share at $190.38. However, Powell Industries stock is currently trading at nearly 100 percent above this calculated value, indicating the market price is dramatically higher than the DCF estimate.

This result suggests that by DCF standards, the stock is significantly overvalued compared to what its long-term cash flow potential justifies.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Powell Industries may be overvalued by 99.7%. Discover 842 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Powell Industries.

Approach 2: Powell Industries Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used metric for valuing profitable companies, as it reflects how much investors are willing to pay today for a dollar of current earnings. For businesses with steady profits like Powell Industries, the PE ratio helps gauge whether the stock price is reasonable compared to its earnings power.

What counts as a “normal” or “fair” PE ratio depends on a company’s growth prospects and risk profile. Fast-growing or less risky firms usually command higher PE ratios, while lower-growth or riskier stocks tend to bargain at lower multiples.

Currently, Powell Industries trades at a PE ratio of 26.2x. In context, the Electrical industry average PE ratio is 30.3x and the average among peers stands even higher at 65.6x. At first glance, Powell might look attractively priced compared to the broader group.

However, Simply Wall St’s proprietary “Fair Ratio” for Powell Industries is 26.0x. This tailored benchmark factors in growth expectations, profit margins, industry nuances, market cap, and risks, making it much more specific than a simple industry or peer comparison.

Since Powell’s PE ratio and its Fair Ratio are almost identical, the current price aligns closely with what can be considered fundamentally fair for the company given all major factors.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1409 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Powell Industries Narrative

Earlier, we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is your own story about Powell Industries. It is a way to combine your perspective on the company’s future with the numbers, shaping assumptions for fair value, revenue growth, and profit margins based on what you believe is likely.

Narratives bridge the gap between a company’s story and its financial forecasts, directly linking your expectations to a dynamic estimate of fair value. They are easy to use and widely adopted on Simply Wall St’s Community page, where millions of investors build and share their viewpoints.

With Narratives, you can see how changes in news, earnings, or business outlook instantly update your story and its corresponding fair value, making it a practical tool for deciding whether to buy or sell by comparing your fair value to the current stock price.

For example, some Powell Industries Narratives reflect confidence in ongoing margin expansion and forecast a fair value as high as $280.00, while more cautious Narratives focus on risks such as margin normalization and predict fair values closer to $224.78. This empowers you to decide which story you believe and what to do next.

Do you think there's more to the story for Powell Industries? 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.

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