Is The Recent 30% Drop In Parsons A Buying Opportunity In 2025?

• Investors may be wondering if Parsons at around $63 is starting to look like value after its run up over the last few years, or if it is still pricing in too much optimism.
• The stock has pulled back sharply, down about 5% over the last week, 26.7% over the past month, and 30% year to date, even though it is still up roughly 80.3% over five years.
• That reversal comes as investors respond to shifting sentiment around government and critical infrastructure spending, along with a broader rotation away from some higher growth, higher expectation names. Parsons sits directly at the intersection of themes such as cybersecurity, national security, and infrastructure modernization, which can swing in and out of favor as the macro narrative changes.
• Based on these checks, Parsons scores a 4/6 valuation score, suggesting it screens as undervalued on several metrics but not all. Below is a walk-through of those different valuation lenses, followed by a more holistic way to think about what the stock may be worth.

Find out why Parsons's -34.4% return over the last year is lagging behind its peers.

Approach 1: Parsons Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a business is worth by projecting the cash it can generate in the future and discounting those cash flows back to today, to reflect risk and the time value of money.

For Parsons, the model starts with last twelve months Free Cash Flow of about $388.6 million and uses analyst forecasts for the next few years, then extrapolates further out. Under this two stage Free Cash Flow to Equity framework, Simply Wall St projects Parsons generating roughly $399.6 million in FCF by 2026, growing toward about $478.1 million by 2035 as growth gradually slows. All figures are in $ and remain comfortably below the billion level, so the focus is on steady, not explosive, compounding.

Discounting these projected cash flows back to today produces an estimated intrinsic value of about $82.94 per share. Compared with the recent market price around $63, the DCF implies Parsons is trading at roughly a 23.6% discount to its calculated fair value. This indicates potential upside if the cash flow trajectory is achieved.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Parsons is undervalued by 23.6%. Track this in your watchlist or portfolio, or discover 903 more undervalued stocks based on cash flows.

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

Approach 2: Parsons Price vs Earnings

For profitable companies like Parsons, the Price to Earnings ratio is a useful way to gauge valuation because it directly links what investors pay today to the profits the business is generating. A higher PE can be justified when investors expect stronger growth or see the earnings as relatively low risk. In contrast, slower growth or higher uncertainty usually warrants a lower, more conservative PE.

Parsons currently trades on a PE of about 28.1x, which sits above the Professional Services industry average of roughly 25x but below the broader peer group average of around 40.4x. Simply Wall St also calculates a proprietary Fair Ratio of about 25.9x for Parsons, which reflects factors such as its earnings growth outlook, profit margins, industry positioning, market cap and specific risk profile. This Fair Ratio is more tailored than a simple comparison with peers or the industry, as it adjusts for the company’s own fundamentals rather than assuming it should trade exactly in line with others.

With Parsons trading modestly above its Fair Ratio, the multiple suggests the stock is slightly ahead of what those fundamentals would justify.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1443 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Parsons Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, an approach on Simply Wall St’s Community page where you connect your view of Parsons’ story with your own assumptions for its future revenue, earnings, margins, and ultimately fair value, then compare that fair value with today’s price to help decide whether to buy, hold, or sell.

Instead of relying only on static ratios, a Narrative links what you believe will drive Parsons’ contracts, growth, and risks to a living financial forecast that automatically updates when new news, earnings, or guidance is released. This helps you keep your thesis current without rebuilding spreadsheets from scratch.

Because these Narratives are easy to set up and used by millions of investors, you can quickly see how different perspectives translate into different valuations. For example, one Parsons Narrative on the platform might assume stronger long term infrastructure demand and assign a fair value around $92 per share, while a more conservative Narrative could bake in slower revenue growth and produce a meaningfully lower fair value. This gives you a clear, side by side view of where your expectations sit in the market.

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