Breaking Down Graco Inc. (GGG) Financial Health: Key Insights for Investors

You're looking at Graco Inc. (GGG) and seeing the classic industrial-stock mixed signal: a solid long-term story but some choppy near-term numbers. Honestly, your caution is warranted.

The market is still trying to digest the Q3 2025 earnings where Graco reported an EPS of $0.73, a slight miss against the $0.75 analyst consensus, and revenue of $543.36 million also fell short. But here's the quick math: analysts are still forecasting a full-year 2025 EPS around $3.06, which keeps the stock's premium Price-to-Earnings (P/E) ratio of 27.33 in focus.

The real challenge is that the company's full-year revenue guidance of low single-digit growth is heavily reliant on acquisitions, not organic growth, plus you defintely need to factor in the 1% to 2% revenue risk from evolving trade tariffs. The business is strong, but the stock is expensive right now.

Revenue Analysis

You need a clear picture of where Graco Inc. (GGG)'s money is coming from, especially with the market volatility we've seen. The direct takeaway is that Graco is managing to post growth, with trailing twelve months (TTM) revenue ending September 2025 at approximately $2.19 billion, representing a modest 2.8% year-over-year increase. This growth is heavily reliant on international markets and acquisitions, which are offsetting a domestic slowdown in a key segment.

Graco Inc.'s core business is the sale of fluid and coating equipment, which are systems used to move, measure, control, dispense, and spray materials across a wide range of industries, from construction to automotive. The company organizes its revenue into three primary business segments: Contractor, Industrial, and Expansion Markets. For the third quarter of 2025 (Q3 2025), the revenue breakdown clearly shows the Contractor segment as the largest contributor.

Here's the quick math on the segment contributions for Q3 2025, which totaled $543.36 million in revenue:

The year-over-year revenue growth of 2.85% for the TTM ending September 2025 is a deceleration from the higher rates seen in the prior years, like the 7.84% growth in 2022. Still, the quarterly trend shows some momentum, with Q3 2025 revenue up 4.65% year-over-year to $543.36 million. The company's guidance for the full 2025 fiscal year remains a low single-digit sales growth on an organic constant-currency basis. That's a realist's forecast, not a cheerleader's.

What this estimate hides is a significant shift in regional performance and organic growth (growth from existing operations, excluding acquisitions). In the second quarter of 2025 (Q2 2025), Graco Inc. saw an organic revenue decline of 3%, primarily driven by lower sales in the Contractor segment. This softness is tied to the North American construction markets, which have been cautious. The good news is that strong international sales are picking up the slack.

• EMEA (Europe, Middle East, and Africa) sales jumped 19% in Q2 2025.
• Asia Pacific sales grew 12% in Q2 2025.
• Acquisitions contributed $62 million to sales growth year-to-date (H1 2025).

The significant change you need to track is the shift in cost structure. Increased tariffs have been a headwind, forcing a targeted price increase in September 2025 to mitigate the higher product costs. This pricing action is defintely a key factor in maintaining their full-year revenue outlook. For a deeper dive into the risks and opportunities, you can check out Breaking Down Graco Inc. (GGG) Financial Health: Key Insights for Investors.

Profitability Metrics

You want to know if Graco Inc. (GGG) is a profit engine or just another industrial name. The short answer is they're an elite performer: their margins in the 2025 fiscal year are significantly higher than the industry average, signaling superior operational efficiency and pricing power.

For the trailing twelve months (TTM) ending September 2025, Graco Inc. generated $2.19 Billion in revenue. This level of scale is important, but the real story is what they keep. Their ability to manage the Cost of Goods Sold (COGS) and operating expenses places them in a league of their own compared to peers in the Industrial Machinery sector.

Margin Analysis: Graco Inc. vs. Industry

Graco Inc.'s profitability ratios for 2025 are defintely a standout. Let's look at the core metrics-Gross Profit, Operating Profit, and Net Profit-and compare them to the average for the broader Machinery industry, which typically sees a Gross Profit Margin of around 35.54% and a Net Profit Margin of 9.77%. Graco Inc. is not just beating the average; they're crushing it.

Here's the quick math on their TTM performance, with the estimated Gross and Operating Profit amounts based on the TTM revenue of $2.19 Billion:

Operational Efficiency and Profitability Trends

The Gross Margin, which was reported at 53% in Q4 2024, shows Graco Inc.'s strong pricing power and efficient manufacturing processes. This means that for every dollar of sales, they keep about 53 cents after paying for the direct costs of making the product. That's a huge buffer compared to the 25% to 35% average for the general Manufacturing sector.

Still, you need to be a trend-aware realist. The company's gross profit margin rate declined by approximately 2 percentage points in both Q1 and Q2 of 2025 year-over-year. What this estimate hides is the impact of higher product costs, including increased tariff costs, and the lower margin rates from recent acquisitions.

• Cost Management: Operating expenses as a percentage of sales decreased in Q1 2025, showing good expense leverage.
• Acquisition Impact: Acquired operations contributed to sales growth but also brought lower margin rates, which is a near-term risk to watch.
• Net Margin Stability: Despite cost pressures, the Net Profit Margin remained steady at 22.7% as of October 2025, just a hair below the previous year's 22.9%.

The stability of the Net Profit Margin is a testament to their cost control efforts further down the income statement. Analysts expect profit margins to rise to 23.6% by 2028, reflecting confidence in their long-term strategy. This is a quality company with a visible path to sustained high margins. If you want to understand the strategic pillars supporting this financial strength, you should review their Mission Statement, Vision, & Core Values of Graco Inc. (GGG)..

Debt vs. Equity Structure

Graco Inc. (GGG) maintains an extremely conservative balance sheet, relying overwhelmingly on equity financing rather than debt to fuel its growth and operations. This approach translates to a remarkably low financial risk profile for investors, a clear sign of management's preference for stability and self-funding.

As of the quarter ending September 2025, Graco Inc.'s debt-to-equity (D/E) ratio stood at a mere 0.02. To put that in perspective, the median D/E ratio for the Industrial Machinery & Supplies & Components industry is around 0.5002, meaning Graco Inc. is significantly less leveraged than its peers. This low ratio suggests the company could defintely take on more debt if a large, accretive acquisition came along, but they choose not to.

Here's the quick math on their debt levels, which are minimal:

• Short-Term Debt & Capital Lease Obligation (Sep. 2025): $46 million.
• Long-Term Debt & Capital Lease Obligation (Sep. 2025): $17 million.
• Total Stockholders' Equity (Sep. 2025): $2,609 million.

This conservative structure is a core part of Graco Inc.'s financial identity. They essentially operate with a net cash position, which was approximately $506.8 million as of June 2025 (cash minus total debt). This substantial cash cushion provides immense flexibility for organic investment, share buybacks, and dividend increases without needing to tap the capital markets.

The company's recent activity underscores this preference for financial stability. In late 2024, Graco Inc. amended its $750 million credit facility, extending the maturity from March 2026 to October 25, 2029. This move wasn't about raising new capital, but about securing long-term liquidity and financial flexibility, ensuring that a large, low-cost credit line is available should a strategic need arise. Plus, a net issuance of debt of only $5.5 million as of September 2025 shows they are not aggressively adding to their debt load.

What this estimate hides is the power of their balance sheet. Having a D/E ratio of 0.02 means almost all assets are financed by equity, not creditors. This is a huge advantage in an economic downturn, as interest expense is negligible, and there's no pressure from debt covenants. For a deeper dive into who owns this highly-equity-financed company, check out Exploring Graco Inc. (GGG) Investor Profile: Who's Buying and Why?

Liquidity and Solvency

You need to know if Graco Inc. (GGG) can cover its short-term bills, and honestly, their liquidity position is rock-solid. As of the most recent quarter in 2025, the company shows exceptional financial resilience, giving you a clear margin of safety.

Their liquidity ratios are defintely a strength. The Current Ratio, which measures current assets against current liabilities, sits at a very healthy 3.18. This means Graco Inc. has over three dollars in current assets for every dollar of short-term debt. Even more telling is the Quick Ratio (or acid-test ratio), which excludes inventory-it was a strong 2.15. A ratio this high, well above the 1.0 benchmark, signals they could pay off all current liabilities immediately, even if sales stopped tomorrow.

Here's a quick snapshot of the liquidity positions:

• Current Ratio: 3.18 (MRQ 2025)
• Quick Ratio: 2.15 (MRQ 2025)
• Working Capital (FY 2024): Approximately $1.092 billion

The working capital trend is also positive, though it requires nuance. While the high ratios imply significant working capital, the TTM (Trailing Twelve Months) period ending September 30, 2025, showed a change in inventory of an increase of $77.38 million. This increase in inventory is a use of cash, but management has also cited improved inventory management as a driver for better cash flow from operations. The core takeaway is that the company is not struggling for cash; they are choosing to hold more inventory, likely to manage supply chain risks or support anticipated future sales growth.

When you look at the Cash Flow Statement, the picture gets even clearer. Graco Inc. is a cash-generating machine. For the TTM period ending September 30, 2025, Operating Cash Flow (OCF) was a robust $672.48 million. This is the cash generated from the core business, and it's the lifeblood of any healthy company.

The company's uses of cash show a clear capital allocation strategy. The Investing Cash Flow reflects a focus on both internal growth and strategic acquisitions. Capital expenditures (CapEx) were a manageable $-47.6 million TTM, but cash acquisitions were a significant $-304.12 million TTM. This tells me they are aggressively using their strong OCF to buy growth, which is a key strategic action. Furthermore, the Financing Cash Flow was a substantial outflow of $-1.288 billion TTM, driven by returning capital to shareholders.

Here's the quick math on their capital return strategy for the year-to-date through Q3 2025: uses of cash included $361 million for share repurchases and $138 million for dividends. They are using their cash strength to boost shareholder value through buybacks and dividends, not just hoarding it. This is a sign of management confidence in future cash generation.

The clear strength here is the combination of high liquidity ratios and exceptional Operating Cash Flow, which provides a massive cushion against any near-term economic volatility. There are no potential liquidity concerns; the company is in a position of strength, actively funding growth and returning capital. For a deeper dive into the company's valuation, you can check out Breaking Down Graco Inc. (GGG) Financial Health: Key Insights for Investors.

Valuation Analysis

You're looking at Graco Inc. (GGG) and wondering if the price is right. My take is that Graco Inc. is currently trading at a premium, suggesting the market is pricing in continued, albeit slowing, growth. As of mid-November 2025, the stock's valuation multiples are elevated compared to historical averages, placing it firmly in the 'fully valued' camp, but still with a 'Moderate Buy' consensus from analysts who see a path to a $94.00 price target.

The core of the valuation story is in the multiples. Graco Inc.'s trailing Price-to-Earnings (P/E) ratio-which compares the current stock price to its earnings per share over the last 12 months-stands at approximately 27.33. Here's the quick math: a P/E this high suggests investors are willing to pay nearly 27 times earnings for a share, a clear sign of a growth stock, not a deep-value play. The forward P/E, based on the $3.06 expected Earnings Per Share (EPS) for the 2025 fiscal year, is slightly lower at 26.38, which still indicates a demanding valuation.

Also, look at the Enterprise Value-to-EBITDA (EV/EBITDA) ratio, which is a cleaner measure of a company's total value relative to its operating cash flow before non-cash charges. Graco Inc.'s EV/EBITDA is around 18.53. For an industrial manufacturer, that's a rich multiple, even for a high-quality name like Graco Inc. To be fair, the Price-to-Book (P/B) ratio-comparing the market price to the book value of assets-is about 5.06 (calculated from the recent price of ~$79.68 and a book value per share of $15.74), which is high but typical for a company with strong intangible assets and a history of high Return on Equity (ROE).

• P/E Ratio (Trailing): 27.33
• EV/EBITDA Ratio: 18.53
• P/B Ratio (Approx.): 5.06

Stock Performance and Analyst Sentiment

Over the last 12 months, Graco Inc.'s stock has seen a notable swing. The 52-week high was $92.86 back in November 2024, while the 52-week low hit $72.06 in April 2025. The current price of around $79.68 places the stock closer to the lower end of that range, but it's still up over 277.22% from its 2016 low, showing its long-term strength. The stock has been in a narrow and falling trend in the near-term, which is defintely something to watch.

The analyst community is split, but generally positive. The consensus rating is a 'Moderate Buy' based on a breakdown of three 'Buy' ratings and three 'Hold' ratings from six firms. This nuanced view suggests that while the company is fundamentally sound, its current valuation leaves little room for error. Their average 1-year price target is $94.00, implying an upside of about 18% from the current November 2025 price. You should always check the Mission Statement, Vision, & Core Values of Graco Inc. (GGG). to see if their long-term strategy aligns with this optimism.

Dividend Health

For income-focused investors, Graco Inc. remains a reliable, though low-yield, payer. The annualized dividend is $1.10 per share, resulting in a dividend yield of approximately 1.4%. The good news is the dividend is highly secure. The dividend payout ratio is a healthy 37.54%, meaning less than two-fifths of the company's earnings are used to cover the dividend, leaving ample cash for reinvestment and future increases. This low payout ratio is a positive signal for the dividend's sustainability, a key factor for any long-term industrial holding.

Risk Factors

You're looking at Graco Inc. (GGG) and seeing a resilient industrial player, but every company faces headwinds, especially in a choppy global economy. The core takeaway for 2025 is that while the balance sheet is strong-with net cash around $100 million-near-term profitability is under pressure from external factors like trade policy and currency swings. This isn't a business model failure; it's a symptom of a globalized supply chain.

The most immediate financial risk is the squeeze on margins. In the first half of 2025, gross profit margins contracted by about 200 basis points (two percentage points) due to higher product costs and the integration of lower-margin acquisitions. This operational challenge is clear in the Contractor segment, where margins fell 5 points to 24% in Q1 2025. That's a defintely a number to watch.

External and Geopolitical Risks

Graco Inc.'s global footprint, while a long-term strength, exposes it to significant geopolitical and market risks. The ongoing trade policy uncertainty is a tangible cost: tariffs added $9 million in costs year-to-date through Q3 2025. Since China accounts for 6% of both Graco Inc.'s sales and production costs, management estimates that rising tariffs could shave off 1-2% of annual revenue. That's a direct hit on the top line.

Another factor is currency volatility. For the full 2025 fiscal year, the company projects that unfavorable currency movements will have an impact of approximately 1 percentage point on net sales and 2 percentage points on net earnings. Plus, you have to consider the competitive environment. Peers like Illinois Tool Works and Ingersoll Rand are always looking to chip away at market share in key segments.

• Geopolitical Risk: Tariffs cost $9 million YTD through Q3 2025.
• Market Risk: Currency drag estimated at 2 percentage points on 2025 net earnings.
• Competition: Constant pressure from large, well-capitalized rivals.

Operational and Strategic Headwinds

The biggest strategic risk is the challenge in organic growth (sales not from acquisitions). While Q3 2025 revenue was up 5% year-over-year to $543.36 million, that growth was driven entirely by acquisitions (+6%), masking an organic sales decline of about 2%. The Contractor segment's organic sales in the Americas, a crucial market, fell 5% in Q2 2025, largely due to weak housing affordability and lower do-it-yourself (DIY) demand.

Here's the quick math on the margin pressure:

Mitigation Strategies and Actions

Graco Inc. isn't sitting still. Their defense against these risks is multi-pronged, focusing on cost control and strategic diversification. They are implementing targeted price increases, which management expects will fully offset the tariff impacts by year-end. Also, the 'One Graco' initiative, a push for operational efficiency, delivered $7 million in expense cuts in Q2 2025.

Strategically, the new Expansion Markets segment is the long-term buffer. This segment, which focuses on high-growth areas like semiconductors and advanced manufacturing, already boasts margins of 24%-a 6-point improvement from 2024. Recent acquisitions, such as Color Service for €63 million, are designed to accelerate this diversification and provide a cushion against the cyclicality of the core industrial and contractor businesses.

If you want to dig deeper into who is betting on this diversification strategy, check out Exploring Graco Inc. (GGG) Investor Profile: Who's Buying and Why?

Next Step: Portfolio Managers: Model a worst-case scenario where organic sales in the Contractor segment fall another 3% in Q4, and assess the impact on the full-year 2025 EPS consensus of $3.06.

Growth Opportunities

You need to know where Graco Inc. is finding its next dollar of growth, and the answer is a classic industrial playbook: targeted acquisitions plus high-margin product innovation. The company's near-term growth is defintely acquisition-fueled, but management is maintaining its guidance for low-single-digit organic revenue growth for the full year 2025, which is a sober, realistic outlook given the macroeconomic headwinds.

Analysts are looking past the immediate organic softness, projecting a stronger trajectory with an expected 7.7% yearly revenue gain and a 9.52% annual earnings growth through 2028. For the current fiscal year, the consensus estimates point to a solid performance, especially when you factor in the recent deal flow. Here's the quick math on the expected top and bottom line for 2025:

The immediate growth driver is strategic mergers and acquisitions (M&A), which contributed 6 percentage points to sales growth in the third quarter of 2025. Graco Inc. completed the acquisition of Color Service S.r.l. in July 2025 for €63 million, which is a smart move to strengthen their powder handling portfolio and expand into new applications. Plus, the prior acquisition of Corob S.p.A. is still integrating and delivering significant sales growth, especially in the Contractor segment's EMEA and Asia Pacific regions, where sales surged by +30% and +40% respectively in Q1 2025.

This geographic and product expansion is key because the company is actively expanding its presence in EMEA (Europe, Middle East, and Africa) and Asia Pacific to offset challenges in the Americas market. On the innovation front, the rollout of the QUANTM electric diaphragm pumps is a major internal growth initiative. This product targets energy efficiency, which aligns with industrial sustainability trends and helps Graco Inc. capture new market share in its core Contractor and Industrial segments. That's a clear path for organic growth.

Graco Inc.'s competitive edge, its economic moat (a structural business advantage that protects long-term profits), is strong. It's a wide-moat industrial firm that consistently delivers a return on invested capital above 20%. This isn't just luck; it's built on manufacturing specialized products for niche, often high-margin applications where competition is limited, and a strong brand reputation that allows for pricing power. Also, maintaining a significant U.S. manufacturing footprint gives them an advantage in managing trade tensions and tariffs, which is a real-world cost-control lever.

To be fair, the market is paying a premium for this quality, so you need to be sure the growth justifies the price. If you want a deeper dive on the institutional ownership and market sentiment, you should check out Exploring Graco Inc. (GGG) Investor Profile: Who's Buying and Why?

• Monitor organic sales growth in Q4 2025.
• Track Color Service integration progress.
• Look for new QUANTM pump sales metrics.

Action: Review Graco Inc.'s Q4 2025 guidance when released to confirm the low-single-digit organic growth forecast is holding steady, focusing on the Industrial and Expansion Markets segments for signs of acceleration.