As of May 22, 2025, Palo Alto Networks Inc's estimated intrinsic value ranges from $9.55 to $66.64 per share, depending on the valuation methodology applied.
| Valuation Method | Fair Value (USD) | Implied Upside/Downside |
|---|---|---|
| Discounted Cash Flow (10Y) | $42.35 | -76.6% |
| Discounted Cash Flow (5Y) | $22.30 | -87.7% |
| Dividend Discount Model (Multi-Stage) | $45.82 | -74.7% |
| Dividend Discount Model (Stable) | $66.64 | -63.2% |
| Earnings Power Value | $9.55 | -94.7% |
Is Palo Alto Networks Inc (PANW) undervalued or overvalued?
With the current market price at $181.26, the stock appears to be significantly overvalued.
Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Palo Alto Networks Inc's intrinsic value, including:
The cost of capital is a critical factor in valuation models, representing the required return for investors.
| WACC Component | Low | High |
|---|---|---|
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.57 | 0.88 |
| Cost of equity | 6.5% | 9.8% |
| Cost of debt | 4.0% | 4.5% |
| Tax rate | 19.5% | 25.0% |
| Debt/Equity ratio | 0.01 | 0.01 |
| After-tax WACC | 6.5% | 9.7% |
Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:
| DCF Model | Fair Value | Enterprise Value | % from Terminal Value |
|---|---|---|---|
| 5-Year Growth | $22 | $13,069M | 87.0% |
| 10-Year Growth | $42 | $26,350M | 77.8% |
| 5-Year EBITDA | $31 | $18,525M | 90.8% |
| 10-Year EBITDA | $45 | $28,345M | 79.4% |
The DDM values a company based on its expected future dividend payments. We used two approaches:
EPV assesses a company's value based on its current normalized earnings power, assuming no growth.
| EPV Component | Value |
|---|---|
| Normalized Earnings | $361M |
| Discount Rate (WACC) | 9.7% - 6.5% |
| Enterprise Value | $3,698M - $5,568M |
| Net Debt | $(1,693)M |
| Equity Value | $5,390M - $7,261M |
| Outstanding Shares | 662M |
| Fair Value | $8 - $11 |
| Selected Fair Value | $9.55 |
| Metric | Value |
|---|---|
| Market Capitalization | $120012M |
| Enterprise Value | $118320M |
| Trailing P/E | 95.67 |
| Forward P/E | 124.15 |
| Trailing EV/EBITDA | 11.10 |
| Current Dividend Yield | 0.00% |
| Dividend Growth Rate (5Y) | 0.00% |
| Debt-to-Equity Ratio | 0.01 |
To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:
| Valuation Method | Weight | Weighted Value |
|---|---|---|
| Discounted Cash Flow (10Y) | 30% | $12.71 |
| Discounted Cash Flow (5Y) | 25% | $5.57 |
| Dividend Discount Model (Multi-Stage) | 20% | $9.16 |
| Dividend Discount Model (Stable) | 15% | $10.00 |
| Earnings Power Value | 10% | $0.96 |
| Weighted Average | 100% | $38.40 |
Based on our comprehensive valuation analysis, Palo Alto Networks Inc's weighted average intrinsic value is $38.40, which is approximately 78.8% below the current market price of $181.26.
Key investment considerations:
Given these factors, we believe Palo Alto Networks Inc is currently significantly overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.