10Y annualized return is
excellent
at 17.5% per year
PH has met or exceeded earnings expectations in
all
recent quarters (10/10)
Moderate Price-to-Earnings Ratio
Strong Return on Equity
Healthy Profit Margins
Reasonable Debt Levels
Strong Interest Coverage
🏆 Strong Operational Excellence
💰 Robust Cash Flow Generation
🛠️ Proven Business Model
📈 Positive Order Trends
🌍 Diverse Market Recovery
High Price-to-Sales Ratio
High EV/EBITDA Ratio
Moderate Operating Profit Margin
Low Quick Ratio
Low Cash Ratio
⚠️ Industrial Market Challenges
⏳ Long Recovery Timeline
Parker-Hannifin demonstrates strong operational excellence and financial health, with a robust business model that allows for margin expansion despite market pressures. However, challenges in the industrial segment and a delayed recovery timeline may temper growth prospects.
Analysis Date: January 30, 2025
Last Updated: March 12, 2025
Past performance does not guarantee future results. The data presented is indicative and may not be updated in real-time.
Parker-Hannifin Corporation makes important equipment and systems that help machines and vehicles work smoothly. They produce a wide range of products, like seals to keep fluids in, filters to clean air and liquids, and components that help control the movement of machines. Their products are used in many industries, including construction, transportation, and aerospace, which involves planes and rockets. Founded in 1917 and based in Cleveland, Ohio, they sell their items to other manufacturers and companies that need reliable machinery.
Streams of revenue
Geographic Distribution
Core Products
Business Type
Business to Business
Competitive Advantages
Key Business Risks
Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.
Benjamin Graham's value investing approach focuses on finding stocks with a significant margin of safety between their intrinsic value and market price.
Intrinsic Value
Estimated fair value based on Graham's formula
$944.46
Current Market Price: $517.28
IV/P Ratio: 1.83x (>1.0 indicates undervalued)
Margin of Safety
Gap between intrinsic value and market price
45.0%
Graham recommended a minimum of 20-30% margin of safety
Higher values indicate a greater potential discount to fair value
Graham Criteria Checklist
Benjamin Graham's value investing checklist for PH
Positive earnings (5+ years)
Dividend history (5+ years)
P/E ratio ≤ 20 (21.08)
P/B ratio ≤ 1.5 (5.08)
Current ratio ≥ 2.0 (1.06x)
Long-term debt < Net current assets (18.46x)
Margin of safety (45.0%)
PH does not meet all Graham criteria
Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.
Profitability metrics measure a company's ability to generate earnings relative to its revenue, operating costs, and other relevant metrics. Higher values generally indicate better performance.
Return on Equity (ROE)
Measures how efficiently a company uses its equity to generate profits
25.43%
Higher values indicate better returns for shareholders
TTM (as of 2025-04-30)
Gross Profit Margin
Percentage of revenue retained after accounting for cost of goods sold
36.16%
Higher values indicate better efficiency in production
TTM (as of 2025-04-30)
Net Profit Margin
Percentage of revenue retained after accounting for all expenses
15.87%
Higher values indicate better overall profitability
TTM (as of 2025-04-30)
The company has a Return on Equity (ROE) of 25.43%, indicating strong profitability and efficient use of equity capital.
The net profit margin of 15.87% reflects solid profitability, indicating that the company retains a good portion of sales as profit.
The operating profit margin of 21.76% is decent but may signal that there is room for improvement in operational efficiency.
Financial health metrics assess a company's ability to meet its financial obligations and its overall financial stability.
Debt to Equity Ratio
Total debt divided by total equity
0.69x
Lower values indicate less financial leverage and risk
Less than 1.0 is conservative, 1.0-2.0 is moderate, >2.0 indicates high risk
Q2 2025
Current Ratio
Current assets divided by current liabilities
1.06x
Higher values indicate better short-term liquidity
Less than 1.0 is concerning, 1.0-2.0 is adequate, greater than 2.0 is good
Q2 2025
The debt-to-equity ratio of 0.69 indicates that the company is not overly reliant on debt financing, suggesting a balanced capital structure.
An interest coverage ratio of 9.48 demonstrates that the company can easily meet its interest obligations, indicating strong financial stability.
The quick ratio of 0.59 indicates potential liquidity concerns, suggesting that the company may struggle to cover short-term liabilities without selling inventory.
The cash ratio of 0.07 shows that the company has minimal cash reserves relative to its current liabilities, which could pose liquidity risks.
Meeting Expectations
Higher values indicate better execution and credibility
Recent Results
EPS
Parker-Hannifin has demonstrated a commitment to operational excellence through its Win strategy, which has delivered significant margin expansion and record segment operating margins across all businesses. This approach has led to a Q2 record of 25.6% adjusted segment operating margin.
The company reported record cash flow from operations of $1.7 billion, equating to 17.4% of sales. This strong cash flow has allowed for significant debt reduction, showcasing financial health and operational efficiency.
Parker-Hannifin's diversified portfolio across various industrial and aerospace sectors positions it strongly against market fluctuations. The ability to achieve record margins even amidst lower sales highlights the resilience of its business model.
The company is observing positive order trends in long-cycle businesses, particularly in aerospace and defense, with an increase in orders of 5%. This indicates a recovery and potential for future growth.
Despite some pressures in certain markets, the forecast indicates potential growth in several verticals, including HVAC and semiconductors. The company anticipates an organic growth forecast of approximately 2% for fiscal year '25.
The industrial segment faces challenges with negative growth in North America and delays in recovery. Specific verticals like off-highway are experiencing significant pressure, which could impact overall growth prospects.
The recovery in industrial markets is expected to be gradual, with some forecasts pushing out recovery timelines, particularly in long-cycle orders which could lead to prolonged muted growth.
