Is Palo Alto Networks, Inc. overvalued or undervalued?

As of 13 February 2025, the valuation grade for Palo Alto Networks, Inc. has moved from fair to very expensive. The company is currently considered overvalued based on its high P/E ratio of 104, which significantly exceeds the industry average. Other notable ratios include an EV to EBITDA of 68.60 and a Price to Book Value of 18.41, both indicating a premium valuation compared to peers.
In comparison, Microsoft Corp. and Oracle Corp., which are both rated attractive, have P/E ratios of 36.58 and 45.21, respectively, highlighting the stark contrast in valuation. Despite a strong return performance, with a 1-year stock return of 26.94% compared to the S&P 500's 10.26%, the current valuation metrics suggest that Palo Alto Networks is not justified at its current price level.