Is Palo Alto Networks, Inc. overvalued or undervalued?

As of 7 July 2025, the valuation grade for Palo Alto Networks, Inc. has moved from expensive to very expensive, indicating a significant concern regarding its valuation. The company appears to be overvalued based on its high P/E ratio of 104, an EV to EBIT of 125.92, and an EV to EBITDA of 68.60, which are substantially higher than many of its peers. For instance, Microsoft Corp. has a P/E of 36.17 and an EV to EBITDA of 22.50, while Oracle Corp. shows a P/E of 51.69 and an EV to EBITDA of 31.10, both suggesting that Palo Alto Networks is trading at a premium compared to these established competitors.
Despite its high valuation, Palo Alto Networks has delivered impressive returns, outperforming the S&P 500 with a 24.75% return over the past year compared to the index's 17.14%. However, the significant valuation metrics indicate that the stock may not be justified at its current price level, reinforcing the conclusion that it is overvalued.