PH

We rate Parker-Hannifin Corp (PH) as a Hold with a composite score of 56.1/100 at a current price of $1023.09. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in stability (74th percentile) and momentum (73th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (28th percentile) and value (32th percentile) tempers our overall conviction. We assign a Narrow Moat rating (50/100), High uncertainty, and Standard capital allocation.

Key items to watch: balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Parker-Hannifin Corp holds a lower-quartile position (#39 of 50) within the Construction sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 56.1/100 places it at rank #1134 in our full 7,333-stock universe. With a $110.9B market capitalization, Parker-Hannifin Corp operates at meaningful scale within the Construction sector, providing competitive advantages in distribution, procurement, and customer reach.

The outlook is moderately positive, with revenue expanding at 6% and favorable momentum (73th percentile) reflecting constructive market sentiment. The business shows steady execution, though the growth rate is below the levels typically associated with high-conviction growth stories. Momentum confirmation provides support for the current price level.

The margin cascade tells an important story: gross margins of 37% (+13.3pp vs sector) narrow to operating margins of 22% (+15.0pp vs sector) and net margins of 17.9%, yielding a gross-to-net conversion rate of 48%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $1023.09, Parker-Hannifin Corp is trading at a premium to fundamental value. Our value factor score of 32/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The premium valuation implies the market is pricing in significant future growth or quality improvements that are not yet fully reflected in current fundamentals.

The stock currently trades at a P/E of 36.2x (a 89% premium to the sector median of 19.1x), EV/EBITDA of 28.9x (at a premium), P/B of 9.0x, P/S of 6.5x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a High uncertainty rating to Parker-Hannifin Corp. Key risk factors include significant leverage (113% debt-to-equity). The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: significant leverage (113% debt-to-equity). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 74th percentile and quality factor at the 48th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: above-average stability (74th percentile) suggests predictable business dynamics; large-cap scale ($110.9B) provides resilience. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate Parker-Hannifin Corp's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 24.9%, and the balance sheet is managed within acceptable parameters (D/E: 113%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; Parker-Hannifin Corp falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 0.80% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, Parker-Hannifin Corp receives a Hold rating with a composite score of 56.1/100 (rank #1134 of 7,333). Our quantitative framework assigns a Narrow Moat (50/100, trend: stable), High uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 51/100.

Our analysis supports a neutral stance on Parker-Hannifin Corp. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.