Should Investors Reassess Parker-Hannifin After Recent Dip and Strong Three-Year Gains?

Deciding what to do with Parker-Hannifin’s stock? You are not alone. In a market full of industrial giants, Parker-Hannifin grabs attention not just for its engineering prowess, but for its impressive share performance. Sure, the past week has seen a dip of 2.1%, and the past month was also slightly in the red at -2.9%, but step back and the bigger picture looks much brighter. Year-to-date, Parker-Hannifin is up 17.2%, nearly matching its one-year gain of 16.9%. The real jaw-dropper is the longer-term: a 188.8% return over three years, and a massive 255.4% over five. These moves reflect both solid company execution and wider optimism in the industrials sector, along with a healthy appetite for companies with strong global footprints like Parker-Hannifin in an era marked by supply chain recalibration and manufacturing reinvestment.

But strong stock price growth can spark just as much caution as excitement. With a last close at $737.86, many investors are now asking whether Parker-Hannifin is still a bargain or if the risk pendulum has swung too far. On a simple scorecard, the company rates a 2 out of 6 for undervaluation checks, a signal that, by some measures, Parker’s stock might now be in pricier territory. Of course, we all know that a single score rarely tells the whole story. That is why I am going to walk through some of the different ways investors look at value, and stick around, because at the end, I will share a perspective that is often even more revealing than any checklist.

Parker-Hannifin scores just 2/6 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 is a common method for estimating a company's intrinsic value by forecasting its future cash flows and discounting them back to today's dollars. This approach tries to answer what Parker-Hannifin is fundamentally worth if you only cared about its ability to generate cash in the years ahead.

Parker-Hannifin currently generates Free Cash Flow (FCF) of $3.37 Billion. Analyst estimates suggest this number is projected to rise steadily, crossing $4.71 Billion by 2029. Beyond 2029, Simply Wall St extrapolates further growth through 2035, but these long-range projections naturally become more uncertain as the forecast period extends. Still, the trend points to robust and growing cash generation for the company.

Based on these assumptions and the two-stage free cash flow to equity approach, Parker-Hannifin’s estimated intrinsic value lands at $647.49 per share. With the current market price at $737.86, the stock appears roughly 14.0% overvalued when judged on this cash flow basis.

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 14.0%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Parker-Hannifin Price vs Earnings (PE)

The Price-to-Earnings (PE) ratio is a widely used tool for valuing profitable companies because it connects a company’s current share price to its actual earnings. This makes it a direct measure of how much investors are willing to pay for each dollar of profit, providing a quick sense of whether a stock is trading cheaply or at a premium relative to its profitability.

What is considered a “fair” PE ratio can vary, as investors typically pay higher multiples for companies with faster growth, strong market positions, and lower risk. For Parker-Hannifin, the current PE sits at 26.4x. That is a bit higher than the broader Machinery industry’s average of 24.1x, but notably lower than the peer group’s average of 35.3x. This suggests that the stock commands a premium over the industry but not the highest levels among direct rivals.

Simply Wall St’s proprietary Fair Ratio comes in at 27.7x, which is calculated by blending factors such as Parker-Hannifin’s earnings growth, profit margins, risk profile, industry conditions, and market capitalization. Unlike a simple peer or industry average, the Fair Ratio is more tailored, capturing the nuances that truly matter for valuation and highlighting where the company stands both on its individual merits and within the market context.

With the actual PE just a hair below the Fair Ratio (26.4x vs 27.7x), Parker-Hannifin looks priced just about right on this metric.

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. A Narrative is a story or thesis you build about a company, describing how you believe the business will perform, what drives its future, and what fair value that story supports. Unlike a static checklist or ratio, a Narrative connects your perspective about Parker-Hannifin’s future (such as growth in automation, aerospace strength, margin shifts, and risks) with a concrete set of forecasts. This ties your assumptions about future revenue and earnings directly to an estimate of what the stock should be worth today.

Narratives are simple and accessible. On Simply Wall St’s platform, millions of investors can create, compare, and update these stories right from the Community page. With a Narrative, you can see if your fair value lines up with the current price and decide if it is time to buy, hold, or sell. Since Narratives update as new company news or earnings are released, your thesis can evolve as events happen.

For example, among Parker-Hannifin Narratives, some users see automation and electrification fueling a fair value as high as $880, while more conservative views, citing risk from aerospace cycles and acquisition costs, argue for only $500. Your own Narrative can help you take a stance and invest with more conviction.

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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