Is Donaldson Co., Inc. overvalued or undervalued?

As of 30 June 2025, the valuation grade for Donaldson Co., Inc. has moved from expensive to very expensive, indicating a significant increase in perceived valuation. The company appears to be overvalued, particularly when considering its P/E ratio of 24, which is notably higher than peers like Autoliv, Inc. with a P/E of 18.06 and Allison Transmission Holdings, Inc. at 9.98. Additionally, Donaldson's EV to EBITDA stands at 16.00, while its PEG ratio is a high 4.61, further supporting the notion of overvaluation compared to its industry.
In terms of peer comparison, Donaldson's valuation metrics are considerably higher than those of its competitors, which suggests that investors may be paying a premium for its stock. The recent stock performance shows that while Donaldson has outperformed the S&P 500 year-to-date with a return of 21.37% compared to 12.22%, its longer-term returns over 3 years and 5 years lag behind the S&P 500, indicating potential concerns about sustainability at these elevated valuation levels.