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

At today's price, PARKER-HANNIFIN CORPORATION (PH) is priced for today's economics sustained for ~8.8 years. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-13 · Source: https://boothcheck.com/report/PH

Headline

FieldValue
TickerPH
CompanyPARKER-HANNIFIN CORPORATION
Current price$950.92/sh
CompositionDiversified Industrial 69% / Aerospace Systems 31%

What The Price Requires (Inversion)

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

FieldValue
Inversion basiswhole-company
Operating margin needed21.7%
Operating margin today22.7%
Margin compression implied-1.0pp
Must persist for8.8y
Multiple paid29x operating income

The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.

Solve inputs: computed at a 10.9% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~1.9 years.

Reconcile: at the x-ray's 9.3% required return this reads ~5.8 years; the models below use their own rates.

How unusual the bet is: elevated

ReferenceValue
vs own history+1.44σ
cohort percentile (of 225 peers)67
sustained it ~8.8 years at this level17%
implied end-window share0%

Valuation X-Ray

Every valuation family lands below the price. The price therefore requires assumptions beyond what those standard frames encode.

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.

FamilyMedian price/FVModelsReads
Asset3.23x5expensive
Earnings3.24x5expensive
Relative2.32x5expensive
Growth1.27x3expensive

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 9.2%); the inversion above states its own rate.

Per-Model Detail (n=18)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$594.111.60xyesFCF base $3.8B, growth 6% (input: historical growth), terminal g 4.0%, WACC 9.2%, 6yr projection
DCF Exit MultipleGrowth$871.431.09xyesExit EV/EBITDA: 22.0x / 24.0x / 26.0x (bear / base = today's held flat / bull), 6yr
Relative ValuationRelative$639.801.49xyesP/E 23.09x (blended: sector 18x + trailing (TTM) 35x), scenarios: 19.3x / 23.1x / 26.9x (bear / base = sector held flat / bull), EV/EBITDA 15.6x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$293.973.23xyesBV/sh $114.13, ROE (TTM) 23.8%, ke 9.3%
Two-Stage Excess ReturnAsset$472.052.01xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$750.681.27xyesRev $21.0B, growth 6% (input: historical growth; tapered), Terminal P/S: 4.8x / 5.8x / 6.8x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$325.322.92xyesEPS $27.11, growth 6% (input: historical EPS growth), PEG=6.14 (Overvalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$250.943.79xyesNormalized EBIT (5y avg op income, one-time charges added back) $3.82B × (1−19%) / WACC 9.2% → EPV (no growth)
Residual IncomeAsset$430.432.21xyesBV $114.13 + 5yr PV of (ROE (TTM) 23.8% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham NumberAsset$263.853.60xyes√(22.5 × EPS $27.11 × BVPS $114.13) — Graham's conservative floor
EV/EBITDA RelativeRelative$468.962.03xyesEBITDA $5.14B × sector EV/EBITDA 12.0x
FCF YieldEarnings$297.993.19xyesFCF $3678.4M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$283.273.36xyesSBC-adj FCF $3.50B (FCF $3.68B − SBC $0.17B) capitalized at Kₑ
Ben Graham FormulaEarnings$451.812.10xyesEPS $27.11 × (8.5 + 2×5.7%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset$76.2312.47xyesBV $114.13 × (ROIC 6.1% / WACC 9.2%)
P/Sales SectorRelative$409.902.32xyesRevenue $20.99B × sector P/S 2.5x
PEG Fair ValueRelative$231.494.11xyesEPS $27.11 × (PEG 1.5 × growth 5.7% (input: historical EPS growth)) → PE 8.5x
Earnings YieldEarnings$293.083.24xyesEPS $27.11 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$9.2b
Net debt / NOPAT (after-tax)2.43x
Net debt / operating income (pre-tax)1.96x
Interest coverage11.7x
Share count CAGR (buyback)-0.5%
Burning cashno

Bullet Takeaways

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)

Aerospace Systems (reported)

Methodology Note

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.

Sources

Parker-Hannifin FY2026 guidance, 2026 · Parker-Hannifin Q3 FY2026 results, 2026 · Parker-Hannifin FY2026 results, 2026 · Parker-Hannifin FY2026 results and guidance, 2026 · analyst consensus, 2026

View the full interactive PH report on boothcheck