Palo Alto Networks, Inc. (PANW)
Valuation Overview•Is Palo Alto Networks, Inc. Overvalued or Undervalued?
Trading at a discount compared to peers, but the underlying intrinsic cash flows struggle to support the current price.
Moderate quality score of 66/100, reflecting stable operating margins and manageable leverage.
Analysts remain bullish, forecasting further upside expansion with consensus targets suggesting solid gains.
Verdict: Solid fundamental quality, though profitability presents a headwind.
Wall Street is broadly bullish, projecting solid upside alongside robust expected earnings growth. The company currently retains all capital for reinvestment and growth rather than returning it to shareholders.
PANW demonstrates strong business quality with robust profitability and healthy margins. This is backed by a fortress balance sheet, holding significant net cash ($1.9B) and minimal debt risk.
The company is driving exceptional top-line expansion (18.8% 3Y CAGR) paired with stable bottom-line earnings. Operating efficiency remains adequate with margins around 9.6%.
| Financial Metric | Trend (12Q) | Latest Qtr | 1Y Growth | 3Y CAGR | 5Y CAGR | 10Y CAGR |
|---|---|---|---|---|---|---|
| Revenue | $3.0B | +14.9% | +18.8% | +22.0% | +25.8% | |
| EBITDA | -$210.0M | — | +156.7% | — | — | |
| Net Income | -$177.0M | -56.0% | — | — | — | |
| EPS (Diluted) | $-0.28 | -56.0% | — | — | — | |
| Free Cash Flow | $788.0M | +11.9% | +24.6% | +33.4% | — |
| Metric | TTM | 3Y Avg | 5Y Avg | 10Y Avg |
|---|---|---|---|---|
| Gross Margin | 71.9% | 73.4% | 71.8% | 71.9% |
| Operating Margin | 9.6% | 9.2% | 3.4% | -1.5% |
| Net Margin | 7.9% | 16.9% | 6.8% | -1.2% |
| FCF Margin | 40.5% | 38.1% | 35.9% | 35.9% |
| Quarter | EPS Est. | EPS Act. | Surprise | EPS | Rev |
|---|---|---|---|---|---|
| Q2'26Latest | $0.79 | $0.85 | +7.2% | ||
| Q1'26 | $0.94 | $1.03 | +9.7% | ||
| Q1'26 | $0.94 | $0.50 | -47.2% | ||
| Q4'25 | $0.89 | $0.93 | +4.4% | ||
| Q3'25 | $0.89 | $0.95 | +7.3% | ||
| Q2'25 | $0.77 | $0.80 | +3.6% | ||
| Q1'25 | $0.78 | $0.81 | +4.0% | ||
| Q4'24 | $1.48 | $0.78 | -47.3% |
Total return is +44.0% (1Y), outperforming the benchmark by +19.1%
| Period | Total Return | vs S&P 500 (Alpha) | Dividend Contribution |
|---|---|---|---|
| YTD | +60.4% | +51.1% | — |
| 1Y | +44.0% | +19.1% | — |
| 3YCAGR | +33.6% | +13.1% | — |
| 5YCAGR | +36.0% | +22.9% | — |
| 10YCAGR | +29.7% | +15.8% | — |
The S&P 500 is at 31.3x trailing P/E — Expensive relative to historical averages.
Quick answers to common questions about Palo Alto Networks, Inc. (PANW) valuation, health, and returns.
Palo Alto Networks, Inc. is estimated to be overvalued under our discounted cash flow framework. relative multiples indicate the stock is Cheap versus peers compared to industry peers. overvalued (implying -15.8% downside from DCF intrinsic value of $242.45)
Palo Alto Networks, Inc. has multiple valuation anchors: DCF Intrinsic Value: $242.45 | Peer Relative Fair Value: $525.88 | Wall Street Analyst Target: $324.79 (implying +12.9% upside). A convergence of these signals offers higher conviction.
Palo Alto Networks, Inc. displays good financial health with a composite quality score of 66/100, supported by a Altman Z-Score of 7.8 (safe zone), Piotroski F-Score of 4/9, Return on Invested Capital (ROIC) of 17.1%.
Palo Alto Networks, Inc. does not return material capital to shareholders via dividends or share repurchases, electing to retain earnings to fund internal growth.
Palo Alto Networks, Inc.'s current growth trajectory is Decelerating. The company achieved +14.9% 1Y revenue growth and -56.0% 1Y EPS growth, compared to its 3Y revenue CAGR of +18.8%.
Wall Street consensus is Buy based on 88 analysts, beating EPS expectations in 58% of recent quarters with a 2-quarter streak. The consensus price target represents a +12.9% change from current levels.
Investment risks for Palo Alto Networks, Inc. include: -36.0% 1-year max drawdown. Volatility risk is characterized by a beta of 1.11x.
No. These computations are purely quantitative model outputs for informational purposes. They do not account for qualitative management shifts or macro events. Always consult a licensed RIA before buying or selling shares.
Disclaimer: This page is for informational purposes only and does not constitute financial advice. All valuation models, scores, and target estimates are automated computations under stated assumptions and should not be relied upon as the sole basis for any investment decision.