Parker-Hannifin trades at $735.30 per share and has stayed right on track with the overall market, gaining 11.3% over the last six months. At the same time, the S&P 500 has returned 8.1%.
Is there a buying opportunity in Parker-Hannifin, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Parker-Hannifin Not Exciting?
We're swiping left on Parker-Hannifin for now. Here are three reasons why PH doesn't excite us and a stock we'd rather own.
1. Lackluster Revenue Growth
We at StockStory place the most emphasis on long-term growth, but within industrials, a stretched historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Parker-Hannifin’s recent performance shows its demand has slowed as its annualized revenue growth of 2% over the last two years was below its five-year trend. 
2. Slow Organic Growth Suggests Waning Demand In Core Business
In addition to reported revenue, organic revenue is a useful data point for analyzing Gas and Liquid Handling companies. This metric gives visibility into Parker-Hannifin’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, Parker-Hannifin’s organic revenue averaged 1.8% year-on-year growth. This performance was underwhelming and suggests it may need to improve its products, pricing, or go-to-market strategy, which can add an extra layer of complexity to its operations. 
3. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Parker-Hannifin’s revenue to rise by 3.9%. Although this projection implies its newer products and services will catalyze better top-line performance, it is still below average for the sector.
Final Judgment
Parker-Hannifin’s business quality ultimately falls short of our standards. That said, the stock currently trades at 25.8× forward P/E (or $735.30 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now. We’d suggest looking at a dominant Aerospace business that has perfected its M&A strategy.
Stocks We Would Buy Instead of Parker-Hannifin
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