Graco
GGG
$77.75
+5.24%
Graco Inc. designs and manufactures fluid handling equipment and systems for industrial, process, and contractor applications, operating within the industrial machinery sector. As a market leader in specialized fluid management, Graco differentiates itself through its focus on difficult-to-handle materials and a diversified portfolio serving automotive, construction, and industrial end markets. The current investor narrative centers on Graco's ability to sustain mid-single-digit revenue growth amid cyclical industrial demand, with attention on margin resilience and cash flow generation in a moderating macroeconomic environment. Recent quarterly results showed 8.1% YoY revenue growth, reinforcing the company's steady execution.…
GGG
Graco
$77.75
Investment Opinion: Should I buy GGG Today?
Rating: Hold. Graco is a high-quality industrial company with strong margins and a fortress balance sheet, but its premium valuation and lack of near-term catalysts warrant a cautious stance. The consensus analyst recommendation is 'hold' with an average target of $90.29, implying 21% upside, but the stock's downtrend suggests waiting for a better entry point.
Supporting Evidence: Graco's trailing P/E of 26.6x is above the industry average of 22x, but its net margin of 23.3% is well above the 15% industry average, justifying some premium. Revenue grew 8.1% YoY in Q4 2025, and TTM free cash flow of $638 million provides a 4.6% FCF yield. The ROE of 19.7% reflects efficient capital use. However, the PEG ratio of 2.94x suggests the stock is expensive relative to its growth rate, and the stock's 14.9% annual decline indicates negative momentum.
Risks & Conditions: The Hold rating would upgrade to Buy if the stock pulls back to $70 (near the 52-week low) or if revenue growth accelerates above 10%. It would downgrade to Sell if margins compress below 20% net margin or if the stock breaks below $72.51 support. Overall, Graco is fairly valued relative to its history (P/E in the middle of its 5-year range of 21x-33x) but slightly overvalued versus peers. The valuation verdict: fairly valued with a slight premium for quality.
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GGG 12-Month Price Forecast
Graco's outlook is balanced: the base case of modest growth and stable margins is most likely, supported by strong cash flows and a solid balance sheet. However, the stock's technical downtrend and premium valuation limit upside potential. The neutral stance reflects the lack of clear catalysts to break the current pattern. An upgrade to bullish would require evidence of accelerating growth or a significant pullback to a more attractive valuation. A downgrade to bearish would follow a break below the 52-week low or a sharp margin contraction.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Graco's 12-month outlook, with a consensus price target around $90.29 and implied upside of +16.1% versus the current price.
Average Target
$90.29
0 analysts
Implied Upside
+16.1%
vs. current price
Analyst Count
—
covering this stock
Price Range
$84 - $100
Analyst target range
Graco is covered by 7 analysts, with a consensus recommendation of 'hold' and an average target price of $90.29. This implies approximately 21% upside from the current price of $74.59. The distribution shows 2 buys (Jefferies, RBC Capital), 2 holds (DA Davidson, Baird), and no sells, indicating a moderately bullish tilt despite the 'hold' consensus. The average target suggests analysts see value at current levels. The target price range spans from $84.00 (low) to $100.00 (high), a spread of $16 or 19% of the average target. The high target of $100 assumes a return to the 52-week high and implies a forward P/E of about 27x, reflecting confidence in earnings growth and multiple expansion. The low target of $84 suggests a more conservative view, pricing in continued margin pressure or slower growth. The wide spread indicates uncertainty about the pace of recovery. Recent ratings actions show stability, with no changes in the past six months, suggesting analysts are waiting for clearer catalysts. The lack of upgrades or downgrades implies the stock is in a wait-and-see pattern.
Bulls vs Bears: GGG Investment Factors
Graco presents a mixed picture: strong fundamentals (high margins, fortress balance sheet, consistent FCF) are offset by a prolonged stock downtrend, elevated valuation relative to peers, and cyclical headwinds. The bull case rests on the company's ability to sustain margin expansion and cash generation, while the bear case focuses on valuation compression and lack of growth catalysts. Currently, the bearish technicals and valuation concerns slightly outweigh the fundamental strengths, but the wide analyst target range suggests the stock could be a value play if it holds support near $72.50. The single most important tension is whether Graco's premium valuation (26.6x P/E) can be sustained without accelerating revenue growth, or if multiple compression will drive the stock lower.
Bullish
- Strong Profitability and Margins: Graco's net margin of 23.3% and operating margin of 27.3% are well above the industrial machinery industry averages of ~15% and ~18%, respectively. This demonstrates pricing power and operational efficiency, supporting premium valuation.
- Fortress Balance Sheet: With a debt-to-equity ratio of just 0.023 and a current ratio of 3.15, Graco has minimal leverage and ample liquidity. This provides resilience during economic downturns and flexibility for acquisitions or share buybacks.
- Attractive Analyst Upside: The average analyst target price of $90.29 implies approximately 21% upside from the current price of $74.59. The high target of $100 suggests potential for 34% upside if the stock returns to its 52-week high.
- Consistent Free Cash Flow Generation: Graco generated $638 million in TTM free cash flow, representing a FCF yield of 4.6%. This cash generation supports a sustainable dividend (payout ratio 35.1%) and reinvestment in the business.
Bearish
- Stock in Sustained Downtrend: Graco has declined 14.9% over the past year versus the S&P 500's 18.4% gain, with a relative strength of -33.3%. The stock is near its 52-week low of $72.51, indicating persistent selling pressure and negative momentum.
- Elevated Valuation vs. Peers: The trailing P/E of 26.6x is a 21% premium to the industry average of 22x. While justified by superior margins, the PEG ratio of 2.94x suggests the stock is priced for above-average growth that may not materialize given mid-single-digit revenue expansion.
- Cyclical Exposure to Industrial Demand: Graco's end markets (industrial, automotive, construction) are cyclical. A moderation in industrial production or a recession could pressure revenue growth, which has already decelerated from 12.6% YoY in Q2 2024 to 8.1% in Q4 2025.
- Limited Near-Term Catalysts: With no recent analyst rating changes and a consensus 'hold' recommendation, the stock lacks clear catalysts. The wide target spread ($84-$100) reflects uncertainty about the pace of recovery, and the stock's low beta (0.92) may limit upside in a market rally.
GGG Technical Analysis
Graco is in a sustained downtrend, with the stock declining 14.9% over the past year compared to the S&P 500's 18.4% gain. The current price of $74.59 sits at 78% of its 52-week range (low $72.51, high $95.69), reflecting a bearish posture near the lower end of the range. This positioning suggests the stock is oversold but could also indicate a value opportunity if fundamentals support a reversal. The 1-year relative strength of -33.3% versus the S&P 500 underscores persistent underperformance. Short-term momentum remains negative, with the stock down 0.9% in the past month and 14.0% over three months. The 1-month decline contrasts with the S&P 500's 0.3% gain, signaling continued selling pressure. The 3-month drop of 14.0% aligns with the longer-term downtrend, suggesting no clear reversal signal yet. The stock's beta of 0.92 indicates slightly lower volatility than the market, but the consistent negative relative strength points to stock-specific weakness. Key support lies at the 52-week low of $72.51, a break below which could accelerate selling toward the $70 psychological level. Resistance is at the 52-week high of $95.69, a level that seems distant without a catalyst. The stock's low volatility (beta 0.92) means it may not rebound as sharply as higher-beta names in a market rally, but it also limits downside relative to the market.
Beta
—
—
Max Drawdown
-22.9%
Largest decline past year
52-Week Range
$73-$96
Price range past year
Annual Return
-10.8%
Cumulative gain past year
| Period | GGG Return | S&P 500 |
|---|---|---|
| 1m | +4.8% | +0.6% |
| 3m | -4.7% | +3.4% |
| 6m | -10.2% | +7.1% |
| 1y | -10.8% | +16.4% |
| ytd | -5.9% | +8.3% |
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GGG Fundamental Analysis
Graco's revenue trajectory is moderately growing, with Q4 2025 revenue of $593 million, up 8.1% YoY from $549 million in Q4 2024. The trailing twelve-month revenue reached approximately $2.24 billion, consistent with the company's $2.2 billion annual sales run rate. Growth has been steady but decelerating from the 12.6% YoY growth seen in Q2 2024, indicating a normalization after post-pandemic demand. Segment data shows Industrial ($284 million) and Contractor ($265 million) segments are roughly balanced, with no single segment dominating. The growth trend supports a stable but not accelerating investment case. Profitability is robust, with Q4 2025 net income of $132 million and a net margin of 22.3%, up from 19.8% in Q4 2024. Gross margin improved to 51.7% from 50.9% a year ago, reflecting pricing power and cost controls. Operating margin of 26.7% is healthy and stable, indicating efficient operations. The company is consistently profitable with strong margins typical of industrial machinery leaders. Graco's balance sheet is fortress-like, with a debt-to-equity ratio of just 0.023 and a current ratio of 3.15, indicating ample liquidity. Free cash flow for Q4 2025 was $184 million, bringing TTM FCF to $638 million, which represents a FCF yield of 4.6% based on the current market cap. The company generates sufficient cash to fund operations and dividends without external financing, with a payout ratio of 35.1%. ROE of 19.7% is strong, reflecting efficient capital use.
Quarterly Revenue
$593156000.0B
2025-12
Revenue YoY Growth
+8.1%
YoY Comparison
Gross Margin
51.7%
Latest Quarter
Free Cash Flow
$637922000.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is GGG Overvalued?
Since net income is positive, the primary valuation metric is the P/E ratio. The trailing P/E is 26.6x, while the forward P/E is 22.1x, implying the market expects earnings growth of roughly 20% over the next year. The gap between trailing and forward P/E suggests optimism about near-term earnings acceleration. Compared to the industrial machinery industry, Graco's trailing P/E of 26.6x is above the sector average of approximately 22x (based on industry data), representing a 21% premium. This premium is justified by Graco's superior net margin of 23.3% versus the industry average of around 15%, and its strong ROE of 19.7%. The premium reflects the market's recognition of Graco's consistent profitability and market position. Historically, Graco's trailing P/E has ranged from 21x to 33x over the past five years. The current 26.6x is near the middle of this range, suggesting the stock is fairly valued relative to its own history. It is not at the extremes, indicating neither excessive optimism nor deep value. The PEG ratio of 2.94x suggests the stock is priced for above-average growth, but given the steady mid-single-digit revenue growth, the PEG appears elevated, warranting caution.
PE
26.6x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 21x~33x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
17.7x
Enterprise Value Multiple
Investment Risk Disclosure
Financial & Operational Risks: Graco's debt-to-equity ratio of 0.023 is negligible, so financial leverage risk is minimal. However, the company's revenue growth is decelerating (from 12.6% YoY in Q2 2024 to 8.1% in Q4 2025), and any further slowdown could pressure margins. The net margin of 23.3% is high but could compress if input costs rise or pricing power weakens. Free cash flow of $638 million is strong, but the payout ratio of 35.1% leaves room for dividend growth, which could be cut if earnings decline. The stock's 14.9% annual decline suggests investors are already pricing in operational headwinds.
Market & Competitive Risks: Graco's trailing P/E of 26.6x is a 21% premium to the industry average of 22x, making it vulnerable to multiple compression if growth disappoints. The stock's beta of 0.92 indicates lower market correlation, but the -33.3% relative strength versus the S&P 500 shows persistent underperformance. Competitive risks include potential disruption from lower-cost manufacturers or technological shifts in fluid handling. The lack of recent news or analyst actions suggests the stock is in a 'show-me' phase, where only tangible earnings beats can reverse sentiment.
Worst-Case Scenario: In a severe industrial recession, Graco's revenue could decline 10-15%, and margins could compress to 20% net margin, reducing EPS to ~$2.80. Applying a 20x P/E (industry average) gives a target of $56, representing a 25% downside from current levels. The 52-week low of $72.51 is a key support; a break below could trigger stop-losses and push the stock to $70, a 6% decline. In a worst-case scenario with multiple compression and earnings miss, the stock could fall 25% to $56, though this is unlikely given Graco's balance sheet strength.
FAQ
The key risks are: 1) Valuation risk: the trailing P/E of 26.6x is above the industry average, and multiple compression could occur if growth disappoints. 2) Cyclical risk: Graco's end markets (industrial, automotive, construction) are sensitive to economic cycles; a recession could reduce revenue and margins. 3) Technical risk: the stock is in a sustained downtrend, down 14.9% over the past year, and a break below the 52-week low of $72.51 could accelerate selling. 4) Growth risk: revenue growth is decelerating (from 12.6% to 8.1% YoY), and if it slows further, the premium valuation becomes harder to justify. The most severe risk is a combination of recession and multiple compression, which could push the stock 25% lower to $56.
The 12-month forecast is balanced across three scenarios. The base case (50% probability) expects Graco to maintain mid-single-digit revenue growth and stable margins, with the stock trading around the analyst average target of $90.29, implying 21% upside. The bull case (25% probability) sees an industrial recovery driving revenue growth above 10% and multiple expansion, pushing the stock to $100 (34% upside). The bear case (25% probability) involves a recession causing revenue decline and margin compression, with the stock falling to $72.51 or below (3% downside). The most likely scenario is the base case, assuming no major macro shocks. Key assumptions include stable industrial demand and Graco's ability to maintain its margin advantage.
Graco's trailing P/E of 26.6x is above the industrial machinery industry average of 22x, representing a 21% premium. However, this premium is partially justified by Graco's superior net margin of 23.3% versus the industry average of 15%, and its ROE of 19.7%. Historically, Graco's P/E has ranged from 21x to 33x over the past five years, and the current 26.6x is near the middle, suggesting fair valuation relative to its own history. The PEG ratio of 2.94x indicates the stock is expensive relative to its earnings growth rate, which is around 9% (based on forward EPS estimates). Overall, Graco is fairly valued with a slight premium for quality, but not overvalued to an extreme.
Graco is a high-quality company with strong margins (23.3% net) and a fortress balance sheet (debt-to-equity 0.023), but its stock has been in a downtrend, down 14.9% over the past year. The analyst consensus is 'hold' with an average target of $90.29, implying 21% upside from the current price of $74.59. However, the trailing P/E of 26.6x is a premium to the industry average of 22x, and the PEG ratio of 2.94x suggests the stock is priced for growth that may not materialize. For long-term investors, Graco could be a good buy on a pullback to $70 or below, where the valuation becomes more compelling. For short-term traders, the lack of catalysts and negative momentum make it a risky buy.
Graco is better suited for long-term investment due to its steady growth, strong cash flows, and dividend yield of 1.3%. The stock's beta of 0.92 indicates lower volatility than the market, making it a defensive holding. Short-term trading is less attractive given the stock's negative momentum (down 14.9% over the past year) and lack of near-term catalysts. For long-term investors, a minimum holding period of 3-5 years is recommended to ride out cyclical downturns and benefit from compounding. The company's consistent profitability and fortress balance sheet provide downside protection, but the premium valuation means investors should be patient for a good entry point.