PARKER-HANNIFIN CORPORATION (PH): what the price assumes

In the published model solve dated 2026-Q2, anchored at $995.02, PARKER-HANNIFIN CORPORATION (PH) is priced for today's economics sustained for ~7.8 years. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-06-28.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/PH

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 10.8% cost of capital; growth searched up to the 25% self-funding ceiling.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.7%); the inversion above states its own rate.

Per-Model Detail (n=15)

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Bullet Takeaways

• Parker-Hannifin makes the motion and control components, hydraulics, pneumatics, filtration, and aerospace systems, that go inside other companies' machines and aircraft, split about 69% diversified industrial and 31% aerospace.
• Aerospace is the growth engine, with the segment's organic sales expected to rise around 12% in fiscal 2026 and a high-margin aftermarket that keeps earning as installed equipment is serviced for decades.
• The defining tension is the price, which trades above every valuation method's estimate and at roughly 35 times trailing earnings, leaving little room if the industrial side cools or the aerospace cycle turns.

Bull Case

Parker-Hannifin is best understood by its stage: a mature industrial that has quietly transformed into a higher-margin, aerospace-tilted compounder, and the market is treating it like the latter. The company spent years acquiring its way deeper into aerospace and motion-control systems and applying its internal operating playbook to lift margins across the portfolio. The result is a business that no longer trades like a cyclical parts maker. Full-year fiscal 2026 adjusted segment operating margin is guided to about 27.2%, up roughly 110 basis points, with incremental margins on new revenue forecast around 40%. A 40% incremental margin means each additional dollar of sales drops a large share straight to operating profit, which is how an industrial generates operating leverage as volumes grow.

The aerospace business is the crown jewel, and it has the most attractive economics in the company. Parker's components go onto aircraft at the original-equipment stage, then earn high-margin aftermarket revenue for the decades those aircraft fly, because every part eventually needs service and replacement and Parker is the qualified supplier. In a recent quarter the aerospace mix ran roughly half OEM and half aftermarket, with both growing strongly, OEM organic growth in the low 20s and aftermarket in the mid-teens. Aftermarket revenue is the recurring annuity inside a cyclical industry: it depends on flight hours and fleet age, not on new aircraft orders, so it cushions the cycle. Parker expects aerospace organic sales up about 12% for fiscal 2026.

The financial profile backs the premium. Parker earns a return on equity near 24%, generates about $3.7 billion in free cash flow, and carries a healthy balance sheet, net debt under two times operating income with interest coverage near 12 times. Q2 fiscal 2026 set a record at about $5.17 billion in sales, up 9% with organic growth of 6.6%, and management raised full-year guidance to adjusted EPS of about $30.40 to $31.00. The bull case is a well-run industrial that has re-rated itself toward aerospace economics, with operating leverage, an aftermarket annuity, and a balance sheet strong enough to keep acquiring and returning capital.

Bear Case

The variable with the most leverage over this thesis is the economic cycle, and the price gives that risk almost no respect. Parker's diversified industrial segment, about 69% of the business, sells into manufacturing, construction, agriculture, energy, and transportation, all of which rise and fall with industrial activity and capital spending. When factory output slows, machine builders cut orders for the hydraulics and filtration Parker supplies, and the revenue that drops carries that same 40% incremental margin in reverse: a dollar of lost sales takes a large share of profit with it. The current results reflect a favorable industrial backdrop and a booming aerospace cycle. Neither lasts forever, and a downturn in industrial demand, driven by rates, capital-spending pullbacks, or a manufacturing recession, would compress the margins the price extrapolates.

The valuation is where the bear case is most concrete, because it is genuinely stretched. No family of valuation method reaches the price. The stock trades at roughly 35 times trailing earnings, far above its industrial peer set, and capitalizing its current earnings power or free cash flow with no growth lands at a fraction of the price. Even the asset and book-value methods, anchored on a book value of about $114 per share, sit well below. The price embeds an operating margin holding above 20% and durable growth, an assumption that ranks among the more demanding in the industrial sector. When every standard lens says expensive, the entire price is a bet on the aerospace strength and the margin expansion continuing uninterrupted, and there is no valuation cushion if either pauses.

The aerospace cycle, the bull's strongest argument, is itself a cyclical force the bear has to weigh. Aftermarket revenue is sticky, but OEM aerospace demand depends on aircraft build rates, which are tied to airline profitability and order cycles that have historically swung hard. The current aerospace boom, with OEM organic growth in the low 20s, is a cyclical high, not a steady state. A pause in aircraft production rates, a defense-budget shift, or an airline demand shock would slow the segment that is carrying the growth story and justifying the premium. The bear case is not that Parker is a weak company, it is an excellent one, but that paying 35 times earnings for a business with a 69% cyclical core, at the top of both an industrial and an aerospace cycle, leaves the price exposed to the reversion that cycles always eventually bring.

Valuation

Parker-Hannifin is a multi-segment industrial, and the right comparison is to its capital-goods peers rather than to the market, weighting the high-multiple aerospace business against the more cyclical industrial core. The price is making a demanding bet: that Parker sustains an operating margin above 20% and durable growth, with the inversion showing the price requiring the company to hold close to its current 22.8% margin rather than fade. For a business two-thirds exposed to the industrial cycle, an assumption that peak-cycle margins persist is the heart of what makes the price stretched.

The methods do not disagree here; they uniformly say expensive. No family reaches the price. The forward-growth methods get closest, with the discounted exit-multiple approach landing near the price by holding today's enterprise multiple flat across the forecast. The peer-multiple lens, at roughly a 23 times blended earnings multiple, sits below the price, and the static earnings-power and asset methods land far below it, because capitalizing current earnings with no growth, or anchoring on book value, cannot reach a price trading around 35 times trailing earnings. That pattern, the price above every family's central estimate, marks Parker as a stock priced for its aerospace re-rating and continued margin expansion, a bet beyond what the standard frames support on current numbers. The premium is the market crediting the aerospace mix shift and the operating discipline; the question is whether both hold through a cycle.

Solvency is a genuine strength and bounds the downside, though not the valuation risk. Net debt under two times operating income, interest coverage near 12 times, and about $3.7 billion of free cash flow mean the balance sheet is sound and the dividend and buyback are well covered, with the share count drifting down slightly. For an industrial, that financial strength is what lets Parker keep acquiring and investing through downturns. What the buyer is underwriting is not balance-sheet risk but valuation and cycle risk: paying a premium multiple for a business at the top of both its industrial and aerospace cycles, where the downside is bounded by the quality of the franchise but the return is bounded by how long the peak margins and aerospace growth persist.

Catalysts

Parker-Hannifin's fiscal 2026 has been a story of aerospace strength and raised guidance. Q2 fiscal 2026 delivered record sales of about $5.17 billion, up 9% with organic growth of 6.6%, and the company raised full-year guidance to sales growth of 5.5% to 7.5% and adjusted EPS of about $30.40 to $31.00. The aerospace segment is the driver, with management expecting organic sales up about 12% for the year and, in a recent quarter, OEM organic growth in the low 20s and aftermarket in the mid-teens. Full-year adjusted segment operating margin is guided to about 27.2%, up roughly 110 basis points, on incremental margins near 40%. The next quarterly prints are the read on whether aerospace growth holds and whether the industrial segment's organic growth firms or softens.

The catalysts that move the thesis are the two cycles Parker rides. On aerospace, watch aircraft build rates and aftermarket flight-hour trends, since the segment carrying the growth story depends on both OEM production and fleet servicing demand. On the industrial side, the trajectory of manufacturing activity and capital spending is the swing factor, because the 69% industrial core levers up and down with the broader economy at high incremental margins. Analyst sentiment is constructive, with a Moderate Buy consensus and an average price target around $1,018 against a price near $953. The developments to monitor are the durability of aerospace organic growth, the firmness of industrial demand as the rate environment evolves, and the pace of margin expansion toward the guided 27.2%, since the premium valuation rests on all three continuing.

Peer Cohorts (Per Segment, With Filing Citations)

Diversified Industrial (reported)

• EMR (EMERSON ELECTRIC CO.)
• FY2025 10-K: …sustainability and safety. The Discrete Automation segment includes solenoid valves, pneumatic valves, valve position indicators, pneumatic cylinders and actuators, air preparation equipment, pressure and temperature switches, electric linear motion solutions, programmable automation control systems and software,…
• FY2025 10-K: …growth in different markets around the world and the adoption of climate change-related policies such as carbon taxes, greenhouse gas emission reductions, incentives or mandates for particular types of energy, or policies that impact the availability of financing for certain types of projects. If We Are Unable to…
• DOV (DOVER Corp)
• FY2025 10-K: …operated a diversified portfolio of high-quality businesses serving a wide variety of industrial and business-to-business end markets with different business models. We believe this diversity is a strength of our portfolio, providing Dover with multiple avenues for organic and inorganic growth, lower cyclicality, and…
• FY2025 10-K: …of traditional and clean fuels (including liquefied natural gas, hydrogen, and electric vehicle charging), cryogenic gases, and other hazardous substances along the supply chain, and safe and efficient operation of convenience retail, retail fueling and vehicle wash establishments. • Imaging & Identification segment…
• ITW (ILLINOIS TOOL WORKS INC)
• FY2025 10-K: …This segment primarily serves the electronics, general industrial, automotive original equipment manufacturers and tiers, energy, industrial capital goods and consumer durables markets. Products in this segment include: • equipment, consumables, and related software for testing and measuring of materials, structures,…
• FY2025 10-K: …products. Businesses in this segment produce engineered adhesives, sealants, lubrication and cutting fluids, and fluids and polymers for auto aftermarket maintenance and appearance. This segment primarily serves the automotive aftermarket, general industrial and MRO markets. Products in this segment include: •…
• ETN (EATON CORPORATION plc)
• FY2025 10-K: …refueling systems, fuel pumps, fuel inerting products, sensors, valves, adapters and regulators; mission systems including oxygen generation system, payload carriages, and thermal management products; high performance interconnect products including wiring connectors and cables. The Aerospace segment also includes…
• FY2025 10-K: …of both on-road and off-road vehicles. Products include high voltage inverters, converters, fuses, circuit protection units, vehicle controls, power distribution, fuel tank isolation valves, and commercial vehicle hybrid systems. The principal markets for the eMobility segment are original equipment manufacturers and…
• IEX (IDEX CORP)
• FY2025 10-K: …agriculture and semiconductor businesses, partially offset by higher volume in the municipal water businesses, which together more than offset the benefit of positive price across the segment. • Adjusted EBITDA margin increased primarily due to positive price/cost as well as net productivity improvements. These…
• FY2025 10-K: …process. The CODM considers Adjusted EBITDA budget and forecast-to-actual variances when making decisions about the allocation of operating and capital resources to each segment. Adjusted EBITDA is also used in determining the compensation of certain employees. 68 Table of Contents The HST segment designs, produces…
• PNR (Pentair plc)
• FY2025 10-K: …separation technologies for the oil and gas industry, residential and municipal wells, water treatment, wastewater solids handling, pressure boosting, circulation and transfer, fire suppression, flood control, agricultural irrigation and crop spray. • Water Solutions - The focus of this segment is to provide great…
• FY2025 10-K: …global companies, regional and local companies, diversified and pure-play companies, and lower-cost manufacturers. Competition may also result from new entrants into, or consolidation among competitors in, the markets we serve offering products and/or services that compete with ours. We compete based on technical…
• IR (Ingersoll Rand Inc.)
• FY2025 10-K: …within the Industrial Technologies and Services segment. On April 1, 2025, the Company completed the acquisition of G & D Chillers, Inc. ("G & D") for cash consideration of $ 20.9 million. The business is a manufacturer of glycol chillers. G & D has been reported within the Industrial Technologies and Services…
• FY2025 10-K: …the Industrial Technologies and Services segment. The goodwill arising from the acquisition is attributable to revenue and cost synergies, anticipated growth of new and existing customers, and the assembled workforce. Substantially all of this goodwill is not expected to be deductible for tax purposes. On February 1,…
• GGG (GRACO INC.)
• FY2025 10-K: Industrial Segment The Industrial segment represented approximately 45 percent of our total sales in 2025. It includes the Industrial and Powder divisions. The Industrial segment markets equipment and solutions for moving and applying paints, powder coatings, sealants, adhesives and other fluids. Markets served…
• FY2025 10-K: …then supply to their customers. Industrial The Industrial division designs and manufactures liquid finishing and advanced fluid dispensing equipment; pumps to move chemicals, petroleum, food, and other fluids; and systems, components, and accessories for the automatic lubrication of bearings, gears, and generators.…
• NDSN (NORDSON CORPORATION)
• FY2025 10-K: …drug infusion, IV & drug delivery, patient care, surgical and biopharma. • Surgical Solutions - Microplegia myocardial protection devices and related consumables used in cardiac surgical procedures. Advanced Technology Solutions This segment integrates our proprietary product technologies into the progressive stages…
• FY2025 10-K: …and cure surfaces. Our precision technology can be found in manufacturing facilities around the world, producing a wide range of goods for medical, electronics, consumer non-durable, industrial and other end markets. Equipment ranges from single-use components to manual, stand-alone units for low-volume operations to…

Aerospace Systems (reported)

• HWM (HOWMET AEROSPACE INC.)
• FY2025 10-K: …. The other market includes all other areas, which represented approximately 4% of the Company's revenue in 2025. Howmet has four reportable segments, which are organized by product on a worldwide basis: Engine Products, Fastening Systems, Engineered Structures and Forged Wheels. Engine Products Engine Products…
• FY2025 10-K: …Ciudad Acuña (2) Engine Products; Fastening Systems Aerospace Castings/Rings and Fasteners Monterrey Forged Wheels Forgings Morocco Casablanca (2) Fastening Systems Fasteners United Kingdom Exeter (2) Engine Products Aerospace and Gas Turbine Castings and Alloy Glossop Engine Products Metal, Billets Ickles Engine…
• TDG (TransDigm Group Incorporated)
• FY2025 10-K: …in the generation, amplification, transmission and reception of microwave signals, and single and two-stage servo values. Primary customers of this segment are engine and power system and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies and repair depots. Products are sold in…
• FY2025 10-K: …handling, delivery systems and electronic components used in the generation, amplification, transmission and reception of microwave signals. Primary customers of this segment are engine and power system and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies and repair depots.…
• HEI (HEICO CORPORATION)
• FY2025 10-K: …misappropriation or obsolescence from occurring by developing new techniques and improving existing methods and processes, which we will continue on an ongoing basis as dictated by the technological needs of our business. We believe that, based on our competitive pricing, reputation for high quality, short lead time…
• FY2025 10-K: …and business aircraft, aircraft engines and related components and equipment. Due in large part to our established industry presence, we enjoy strong customer relations, name recognition and repeat business. We sell our products to a broad customer base consisting of domestic and foreign commercial and cargo…
• CW (CURTISS-WRIGHT CORPORATION)
• FY2025 10-K: …The commercial aerospace business is primarily impacted by OEM production rates of new aircraft, while the defense business is primarily impacted by government funding and spending on new programs, primarily driven by the U.S. Government. Certain industrial businesses within our Aerospace & Industrial segment are…
• FY2025 10-K: …avionics and electronics, flight test equipment, and aircraft data management solutions. The Naval & Power reportable segment is comprised of businesses that primarily provide products to the naval defense and power & process markets, and to a lesser extent, the aerospace defense markets. The products offered include…
• MOG-A (MOOG Inc.)
• FY2025 10-K: …and existing fleets. Commercial Aircraft. We design, manufacture and integrate primary and secondary flight-critical control systems and products for various commercial aircraft including widebody, narrowbody, business jets and regional jets for both OEM and aftermarket customers. Our large commercial production…
• FY2025 10-K: …in aerospace and defense and industrial markets. We have four operating segments: Space and Defense, Military Aircraft, Commercial Aircraft and Industrial. Additional information describing the business and comparative segment revenues, operating profits and related financial information for 2025, 2024 and 2023 are…
• WWD (WOODWARD, INC.)
• FY2025 10-K: …to new product concepts. We believe this collaboration allows us to develop technology, new systems, and products that are aligned with our customers' needs and future performance, which increases the likelihood that our systems and components will be selected for inclusion in the platforms developed by our…
• FY2025 10-K: …technology and design, product performance, and conformity with customer specifications. Additional factors are customer service and support, including on-time delivery and customer partnering, product quality, price, reputation, and local presence. Both of our segments operate in uniquely competitive environments.…
• RTX (RTX CORPORATION)
• FY2025 10-K: …Missile (ESSM) programs, SPY-6 radar programs, and certain classified programs. These increases were partially offset by lower net sales of $0.3 billion within air and space defense systems, primarily driven by lower development program volume partially offset by higher net sales on advanced medium-range air-to-air…
• FY2025 10-K: …aerospace industry. Our commercial aerospace businesses constitute a substantial portion of our financial results, and the performance of those businesses is directly tied to economic conditions in the commercial aerospace industry, which is cyclical in nature. Capital spending and demand for aircraft engines,…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.