Palo Alto Networks Inc (PANW) Stock Analysis
Palo Alto Networks Inc (PANW) Stock Analysis
Analysis from 10-Q filed 2025-11-20. Data as of Q1 2026.
Overall Grade: F (Concerning)
Palo Alto Networks Inc faces challenges in financial performance that warrant careful analysis.
| Metric | Value | Context |
|---|---|---|
| ROIC | 12.4% | Solid returns |
| FCF Margin | 36.0% | Strong cash generation |
| Debt/Equity | 0.0x | Conservative leverage |
Investment Thesis: Healthy free cash flow margin of 36.0% provides financial flexibility for growth and shareholder returns.
Explore Palo Alto Networks Inc: Earnings History | Filing Intelligence | ROIC Analysis
Profitability: Palo Alto Networks Inc earns 12.4% ROIC, Top 50% in Technology
Palo Alto Networks Inc's trailing-twelve-month ROIC of 12.4% ranks Top 50% in Technology companies (sector median: 5.2%), driven by NOPAT margin of 9.9% combined with asset turnover of 0.4x. Source: 10-Q filed 2025-11-20. Gross margin of 73.5% with operating margin at 14.4% reflects strong pricing power.
| Metric | PANW | Rating | Context |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 12.4% | Good | Above sector median of 5.2% |
| Return on Equity (ROE) | 16.2% | Good | Efficient use of shareholder equity |
| Gross Margin | 73.5% | Excellent | Strong pricing power |
| Operating Margin | 14.4% | Good | Moderate operational efficiency |
Cash Flow: Palo Alto Networks Inc generates $3.6B FCF at 36.0% margin, positive NaN/8 quarters
Palo Alto Networks Inc generated $3.6B in free cash flow (TTM), a 36.0% FCF margin, a margin that ranks Top 5% in Technology. Operating cash flow exceeds net income by 3.1x, indicating high earnings quality. FCF was positive in N/A of the last 8 quarters. Source: 10-Q filed 2025-11-20.
| Metric | PANW | Rating | Context |
|---|---|---|---|
| Free Cash Flow Margin | 36.0% | Excellent | Excellent cash conversion |
| Free Cash Flow (TTM) | $3.6B | Good | Positive cash generation |
| OCF/Net Income | 3.1x | Excellent | High earnings quality |
| FCF Consistency (8Q) | N/A | Warning | Variable cash flow |
Balance Sheet: Palo Alto Networks Inc at 0.0x leverage
Palo Alto Networks Inc's debt-to-equity ratio of 0.0x reflects conservative leverage. Source: 10-Q filed 2025-11-20.
| Metric | PANW | Rating | Context |
|---|---|---|---|
| Debt to Equity | 0.0x | Excellent | Conservative capital structure |
Valuation: Palo Alto Networks Inc trades at 94.6x earnings
Palo Alto Networks Inc trades at a P/E of 94.6x. Free cash flow yield of 3.0% reflects market expectations for growth.
| Metric | PANW | Rating | Context |
|---|---|---|---|
| P/E Ratio | 94.6x | Warning | Premium valuation |
| EV/Sales | 11.8x | Warning | Growth premium priced in |
| FCF Yield | 3.0% | Adequate | Lower cash yield |
Capital Allocation: Palo Alto Networks Inc returns 0.0% shareholder yield
Palo Alto Networks Inc's total shareholder yield is 0.0% (dividends + buybacks). Source: 10-Q filed 2025-11-20.
| Metric | PANW | Rating | Context |
|---|---|---|---|
| Total Shareholder Yield | 0.0% | Warning | Dividend + buyback yield combined |
| Total Capital Returned (TTM) | $0 | Adequate | Dividends + buybacks returned to shareholders |
Sector Rankings
| Metric | Value | Percentile | vs Median |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 12.4% | Top 50% | 2.4x above |
| Free Cash Flow Margin | 36.0% | Top 5% | 4.0x above |
| Gross Margin | 73.5% | Top 25% | 1.4x above |
| Operating Margin | 14.4% | Top 50% | 3.0x above |
| Return on Equity (ROE) | 16.2% | Top 50% | 3.3x above |
| P/E Ratio | 94.6x | N/A | - |
Financial Scorecard
| Metric | PANW | Rating | Sector Context |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 12.4% | Good | Top 50% of sector (median: 5.2%) |
| Free Cash Flow Margin | 36.0% | Excellent | Top 5% of sector (median: 9.1%) |
| Gross Margin | 73.5% | Excellent | Top 25% of sector (median: 51.8%) |
| Debt to Equity Ratio | 0.0% | Excellent | Conservative capital structure |
| P/E Ratio (Price-to-Earnings) | 94.6x | Warning | High expectations priced in |
| Free Cash Flow Yield | 3.0% | Warning | Growth-focused valuation |
Frequently Asked Questions
Q: What is Palo Alto Networks Inc's Return on Invested Capital (ROIC)?
Palo Alto Networks Inc (PANW) has a trailing twelve-month Return on Invested Capital (ROIC) of 12.4%. This compares above the sector median of 5.2%. An ROIC between 12-20% indicates solid capital allocation and sustainable competitive position.
Q: What is Palo Alto Networks Inc's Free Cash Flow Margin?
Palo Alto Networks Inc (PANW) has a free cash flow margin of 36.0%, generating $3.6 billion in free cash flow over the trailing twelve months. A FCF margin above 20% indicates excellent cash conversion and a high-quality business model.
Q: Is Palo Alto Networks Inc stock overvalued or undervalued?
Palo Alto Networks Inc (PANW) trades at a P/E ratio of 94.6x, which is above the sector median of N/A. The EV/Sales multiple is 11.8x. Free cash flow yield is 3.0%, reflecting growth expectations priced into the stock.
Q: What is Palo Alto Networks Inc's revenue and earnings growth?
Palo Alto Networks Inc (PANW) grew revenue by 15.4% year-over-year. Earnings per share increased by 2.8% compared to the prior year. Solid growth above 10% suggests healthy business momentum.
Q: How does Palo Alto Networks Inc compare to competitors in Technology?
Compared to other companies in Technology, Palo Alto Networks Inc (PANW) shows: ROIC of 12.4% is above the sector median of 5.2% (Top 31%). FCF margin of 36.0% exceeds the sector median of 9.1% (Top 5% of sector). Gross margin at 73.5% is 21.7 percentage points higher than sector peers. These rankings are based on MetricDuck's analysis of all Technology companies with available SEC filings.
Q: What warning signs should I watch for with Palo Alto Networks Inc?
Investors in Palo Alto Networks Inc (PANW) should monitor these potential warning signs: 1) ROIC has been declining, potentially signaling deteriorating competitive position. Regular monitoring of SEC filings and quarterly trends is recommended.
Data Source: Data sourced from 10-Q filed 2025-11-20. TTM metrics as of Q1 2026.
Methodology: Financial metrics calculated from SEC 10-K and 10-Q filings using standardized formulas. Sector comparisons use peer group based on SIC code.
Scope: This analysis covers SEC filing fundamentals — profitability, cash flow, balance sheet, and valuation metrics. For analyst estimates and price targets, consult sell-side research.
This analysis is for informational purposes only and does not constitute investment advice.