Is Graco Fairly Priced After Recent Share Weakness and Strong Multi Year Returns?

• Wondering if Graco at around $82 a share is a quiet bargain or a value trap in the making? This breakdown will walk you through what the current price is really telling us.
• Despite a modest slide of 0.5% over the last week and being down 8.2% over the past year, Graco still sits on a 27.0% return over 3 years and 29.4% over 5 years, which points to a longer term story beneath the recent softness.
• Recently, investors have been reacting to broader industrial and capital goods sector sentiment, with shifting expectations around manufacturing demand and capex cycles influencing how they price companies like Graco. In addition, ongoing commentary about infrastructure spending and reshoring trends has kept Graco in the conversation as a potential beneficiary if growth momentum returns.
• Right now, our valuation checks give Graco a score of 0/6, suggesting it does not screen as undervalued on traditional metrics. In the next sections, we will unpack those valuation approaches and then finish with a more nuanced way to think about what the stock might be worth.

Graco scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Graco Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a company is worth by projecting the cash it can generate in the future and then discounting those cash flows back to today. For Graco, the model starts with last twelve months Free Cash Flow of about $545 million and uses analyst forecasts and extrapolations to map a path of steady growth.

Analysts see Free Cash Flow rising to around $612 million by 2027, and Simply Wall St then extends those projections further, with forecast FCF reaching roughly $823 million by 2035. All of these future cash flows are converted into today’s dollars using a required rate of return, and then summed to arrive at an estimated intrinsic value per share of about $73.16.

With Graco’s current share price sitting around $82, the DCF result implies the stock is roughly 12.7% above its modeled fair value. On this cash flow view it screens as modestly overvalued rather than a hidden bargain.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Graco may be overvalued by 12.7%. Discover 925 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 Graco.

Approach 2: Graco Price vs Earnings

For a consistently profitable business like Graco, the price to earnings ratio is a straightforward way to judge whether investors are paying a sensible price for each dollar of current earnings. In general, faster growing and lower risk companies can justify higher PE ratios, while slower growth or higher uncertainty should translate into lower, more conservative multiples.

Graco currently trades on a PE of about 27.5x, which is noticeably above both the Machinery industry average of roughly 24.2x and the broader peer group average of around 24.5x. On the surface, that suggests the market is already baking in a premium for Graco’s quality and growth profile.

Simply Wall St’s Fair Ratio framework goes a step further by estimating what PE multiple would be reasonable once you factor in Graco’s earnings growth outlook, profitability, industry positioning, market cap and risk profile. For Graco, that Fair Ratio comes out at about 22.3x, implying a lower justified multiple than where the stock trades today. Because this approach adjusts for company specific strengths and risks, it can be more informative than a simple comparison with peers or the sector average. With the current PE well above the Fair Ratio, Graco again looks somewhat expensive on this lens.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1441 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Graco Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to connect your view of Graco’s business to a concrete forecast and fair value estimate. A Narrative is your story behind the numbers, where you spell out how you expect Graco’s revenue, earnings and margins to evolve and what you think the stock is worth as a result. On Simply Wall St’s Community page, millions of investors use Narratives as an easy, guided tool that links a company’s story to a financial model, then compares its Fair Value to the current share price to help decide whether it looks like a buy, hold or sell. Narratives update dynamically as new information, such as earnings or major news, comes in, so your fair value view stays alive rather than frozen. For example, one Graco Narrative on the platform might see fair value closer to $100 based on strong product launches and margin gains, while a more cautious one might sit nearer $79 due to trade and demand risks.

Do you think there's more to the story for Graco? 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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