Does Parker-Hannifin’s 25% Surge in 2024 Signal More Room to Grow?

If you have been tracking Parker-Hannifin, you are probably wondering whether the current share price still offers room to grow or has already run far ahead of itself. The last close saw the stock at $774.18, a level that has turned a few heads, and for good reason. In just the past week, it’s up 4.6%, and over the past year, it has soared 25.4%. Looking even further back, Parker-Hannifin’s five-year return sits at an astonishing 280.3%. Momentum like this doesn’t come out of nowhere.

What’s behind these impressive moves? Recent market optimism is partly fueled by Parker-Hannifin’s steady expansion into automation and fluid management, areas that continue to gain long-term attention as industries modernize. Positive sentiment has also been supported by the company’s initiatives in sustainable technology, capturing investor excitement around the global drive for efficiency and reliability in industrial solutions.

Still, strong performance doesn’t always mean the stock is a bargain, and that’s where valuation comes in. Based on our six-point valuation check, Parker-Hannifin receives a value score of just 1, signaling that it is considered undervalued in only one area. Clearly, there’s more to the story than price momentum alone. Next, we will dig into the key valuation measures, how Parker-Hannifin fares, and why traditional metrics might not always tell the whole story. Stay tuned for a framework that could offer a more complete perspective by the end of this article.

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) model estimates a company’s value by projecting its future cash flows, then discounting those back to present day using an appropriate rate. This approach focuses on the cash Parker-Hannifin is expected to generate and helps investors see beyond current earnings or market sentiment.

Currently, Parker-Hannifin generates Free Cash Flow (FCF) of $3.37 Billion. Analyst estimates suggest this will grow steadily, with FCF projected to reach approximately $4.71 Billion by 2029. While specific analyst estimates extend only about five years, additional projections rely on continued growth assumptions extrapolated by Simply Wall St. This results in a ten-year projected FCF of over $5.7 Billion.

Based on this two-stage Free Cash Flow to Equity model, Parker-Hannifin’s intrinsic fair value is estimated at $650.90 per share. With shares trading at $774.18, the DCF model suggests the stock is 18.9% above its calculated fair value, indicating it is currently overvalued according to its long-term cash flow potential.

Result: OVERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Parker-Hannifin may be overvalued by 18.9%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Parker-Hannifin Price vs Earnings

For profitable companies like Parker-Hannifin, the Price-to-Earnings (PE) ratio is a widely used tool to assess valuation. The PE ratio helps investors understand how much they are paying for each dollar of current earnings, which is especially relevant for established businesses generating consistent profits.

What is considered a “normal” or “fair” PE ratio often depends on expectations for growth and the perceived risk of the business. Faster-growing companies or those seen as less risky may command higher PE multiples. In contrast, companies with slower growth or greater uncertainty typically trade at lower PE ratios.

Currently, Parker-Hannifin trades at a PE of 27.7x. For comparison, the average Machinery industry stock trades at 24.7x, and the average for Parker-Hannifin's direct peers is even higher at 36.9x. However, instead of relying solely on these broad benchmarks, Simply Wall St also calculates a proprietary “Fair Ratio.” This metric takes into account not just industry or peer comparisons, but also factors such as Parker-Hannifin’s earnings growth, market cap, profit margins, and risk profile to determine what an appropriate multiple should be for this specific company.

Simply Wall St’s Fair Ratio for Parker-Hannifin is 27.7x, which is practically identical to its current PE. This suggests the stock is valued about right when considering its unique characteristics rather than just how it stacks up to broader averages.

Result: ABOUT RIGHT

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

Upgrade Your Decision Making: Choose your Parker-Hannifin Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. Rather than focusing solely on ratios or forecasts, Narratives let you craft your own story about Parker-Hannifin. You can form your perspective on its future using your personal fair value, growth predictions, and views on its business strategy.

A Narrative is simply the connection between a company’s story, a financial forecast, and the calculated fair value that results. It allows you to combine the numbers with the "why." For example, you might consider how you expect automation or electrification trends to impact Parker-Hannifin’s future and, ultimately, its share price.

Narratives are simple to create and use, and they are built right into our Community page at Simply Wall St. Here, millions of investors share and update their own perspectives. These Narratives help you quickly compare your idea of fair value to the current market price, making it easier to decide whether to buy, hold, or sell.

As company news or results roll in, Narratives update automatically, so your story (and numbers) always reflect the latest information. For instance, one Narrative for Parker-Hannifin might project robust growth due to persistent demand in aerospace and smart manufacturing, supporting a high price target of $880. Another might anticipate tougher industrial headwinds, margin pressure, and integration risks, using a more cautious view with a fair value around $500.

Do you think there's more to the story for Parker-Hannifin? Create your own Narrative to let the Community know!

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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