PARKER HANNIFIN CORP (NYSE:PH) – A Quality Stock with Strong Fundamentals

PARKER HANNIFIN CORP (NYSE:PH) stands out as a potential candidate for quality investors, meeting key criteria from the Caviar Cruise screen. The company’s strong profitability, efficient capital allocation, and solid financial health make it worth a closer look. Below, we examine why PH fits the quality investing profile.

Key Strengths of PARKER HANNIFIN CORP

• High Return on Invested Capital (ROIC): PH delivers an impressive ROIC (excluding cash and goodwill) of 63.3%, well above the 15% threshold for quality stocks. This indicates efficient use of capital to generate profits.
• Strong EBIT Growth: The company’s EBIT has grown at a 13.9% annual rate over the past five years, outpacing its revenue growth of 3.8%, suggesting improving operational efficiency.
• Healthy Debt Management: With a Debt-to-Free Cash Flow ratio of 3.0, PH can repay its debt in just three years using current cash flows, reflecting financial stability.
• Profit Quality: PH converts net income into free cash flow at an exceptional rate, with a five-year average profit quality of 137.1%, far exceeding the 75% benchmark.
• Profitability Margins: The company maintains strong operating and profit margins (20.6% and 17.1%, respectively), outperforming most peers in the machinery industry.

Fundamental Analysis Summary

PH earns a 5/10 overall fundamental rating, with standout profitability (9/10) but mixed results in growth (3/10) and valuation (2/10). While its earnings and revenue growth have been modest recently, its high margins and efficient capital deployment compensate for slower expansion. The stock trades at a premium (P/E of 26.4), which may be justified by its profitability and stability.

Our Caviar Cruise screener lists more quality stocks updated daily. For a deeper dive, review the full fundamental report on PH.

Disclaimer

This is not investment advice. Always conduct your own research before making investment decisions.