Wondering if Palo Alto Networks is still worth buying after its huge run up over the last few years, or if the market has already priced in the story? This piece will walk you through what the numbers are really saying about its value.
The stock is up 153.9% over 3 years and 223.5% over 5 years, but more recently it has slipped, down 3.6% over the last week, 8.7% over the last month, and 2.5% over the past year, even though it is still up 6.1% year to date.
That kind of whiplash in returns has come alongside a steady drumbeat of headlines about cybersecurity budgets staying resilient, high profile breaches keeping security top of mind for CIOs, and Palo Alto Networks continuing to expand its platform with AI driven security offerings. Together, these themes have reinforced the long term growth narrative while also sparking debate about how much of that future is already baked into the share price.
Right now, Palo Alto Networks only scores a 1 out of 6 on our valuation checks, which suggests the market may be paying up for quality. Next, we will unpack what that score really means by looking at different valuation approaches, and then circle back to a more complete way of thinking about what this business is worth.
Palo Alto Networks scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
A Discounted Cash Flow model estimates what a company is worth today by projecting its future cash flows and then discounting those back into current dollars, reflecting the risk and time value of money.
For Palo Alto Networks, the latest twelve month Free Cash Flow is about $3.8 billion, and analysts expect this to keep growing strongly as cybersecurity spending expands. On Simply Wall St’s 2 Stage Free Cash Flow to Equity model, projected Free Cash Flow rises to roughly $8.0 billion by 2030, with later years extrapolated beyond the 5 year analyst window. All cash flows are assessed in $ and then discounted to today to arrive at an estimated fair value of $226.81 per share.
Compared with the current share price, this implies the stock is about 15.5% undervalued on a DCF basis. That suggests investors are still getting a reasonable entry point, despite the strong multiyear share price performance.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Palo Alto Networks is undervalued by 15.5%. Track this in your watchlist or portfolio, or discover 907 more undervalued stocks based on cash flows.
PANW Discounted Cash Flow as at Dec 2025
For a profitable company like Palo Alto Networks, the Price to Earnings (PE) ratio is a practical way to gauge how much investors are willing to pay today for each dollar of current earnings. In general, faster growth and lower perceived risk justify a higher, or more expensive, PE multiple, while slower growth and higher uncertainty tend to pull that multiple down.
Palo Alto Networks currently trades on a PE of about 119.6x, which is well above both the Software industry average of roughly 32.9x and the broader peer group, which averages around 48.0x. Simply Wall St goes a step further by estimating a “Fair Ratio” of 43.3x. This is the PE multiple the company might reasonably trade on given its specific mix of earnings growth, profitability, industry, size and risk profile. This Fair Ratio is more informative than a simple peer or industry comparison because it explicitly bakes in those company specific drivers rather than assuming all software stocks deserve the same multiple.
Set against the current PE of 119.6x, the Fair Ratio of 43.3x suggests the shares are pricing in a very optimistic outlook and look expensive on an earnings basis.
Result: OVERVALUED
NasdaqGS:PANW PE Ratio as at Dec 2025
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Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to connect your view of Palo Alto Networks’ story to a concrete financial forecast and fair value estimate.
A Narrative is your investment story in numbers, where you describe how you think revenue, earnings and margins will evolve, and the platform then turns that into an implied fair value that you can compare against today’s share price to decide whether PANW looks like a buy, hold or sell.
On Simply Wall St’s Community page, Narratives are easy to create and follow, used by millions of investors, and they update dynamically as new information such as earnings results, acquisitions or major breaches is released. This helps keep your fair value view in sync with the latest data.
For example, one investor might build a bullish Palo Alto Networks Narrative assuming 14 percent plus annual revenue growth, rising margins and a future PE above 100x that supports a fair value near $225. A more cautious investor could dial back growth and margins toward the low end of analyst expectations, use a lower PE and arrive at a fair value closer to $130, showing how different stories can justify very different price targets.
Do you think there’s more to the story for Palo Alto Networks? Head over to our Community to see what others are saying!
NasdaqGS:PANW 1-Year Stock Price Chart
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include PANW.
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