Helios Technologies (HLIO): Is the Current Valuation Still Attractive Despite Elevated Multiples?

The debate over Helios Technologies' (HLIO) valuation has intensified as investors weigh its elevated multiples against a backdrop of strong earnings growth and sector tailwinds. With a forward price-to-earnings (P/E) ratio of 19.19 as of December 2025-slightly above its five-year average of 18.84-HLIO appears to trade at a premium to the industrial machinery sector's forward P/E of 20.51X. However, this premium must be contextualized against the company's recent financial performance, strategic initiatives, and the broader growth trajectory of its core markets.

Valuation Metrics: Elevated but Justified?

HLIO's valuation multiples suggest a mixed picture. Its price-to-book (P/B) ratio of 1.97 aligns with its three-year average of 1.89 but lags its five-year average of 2.51. Meanwhile, the price-to-sales (P/S) ratio of 2.18 exceeds the industry average of 1.84 by 18.31%, reflecting investor optimism about its revenue-generating potential. These metrics position HLIO as neither a clear value play nor a speculative bet, but a company with balanced growth and asset-based appeal.

Critically, the industrial machinery sector's average P/E of 18.86 contrasts with HLIO's 26.28 P/E reported by Macrotrends, indicating a significant premium. Yet this discrepancy may be less concerning when considering HLIO's outperformance in earnings and revenue. For instance, Q3 2025 results showed a 10.77% beat on earnings per share (EPS) and a 4.28% revenue beat, driven by a 13% year-over-year sales growth and a 200-basis-point expansion in gross margins. Such operational strength could justify a higher multiple, particularly in a sector projected to grow at 8.49% through 2030.

Recent Performance and Sector Dynamics

HLIO's stock price has exhibited volatility in late 2025, with a 3.05% pullback on November 20 and a 12-month total return of 23.62% as of December 2025 according to company data. While analysts project a 12-month target of $52.40-slightly below the December 19 closing price of $54.66 according to stock analysis-this suggests a potential correction rather than a collapse in investor sentiment. The company's recent divestiture of its Custom Fluid Power business for a $21 million gain reported by Investing.com and its focus on core hydraulics operations further underscore its commitment to operational efficiency.

The electro hydraulics market, where HLIO holds a significant position, is poised for robust growth. The segment is expected to expand at 14.2% CAGR through 2032, driven by demand for energy-efficient solutions and automation. HLIO's Hydraulics segment, which accounted for 65% of Q1 2025 sales, faces near-term challenges, including a 3% year-over-year decline in Q2 2025 due to weak industrial and mobile markets. However, the company's strategic refocusing on core brands and cost optimization initiatives could mitigate these headwinds.

Long-Term Investment Case

The undervaluation narrative for HLIO hinges on two key factors: the sustainability of its earnings growth and the alignment of its valuation with sector trends. While its P/E ratio exceeds the industrial machinery sector average, the broader S&P 500 Industrials Sector trades at 26.20, suggesting HLIO is relatively fairly valued within the larger industrials universe. Moreover, the global industrial machinery market's projected expansion to $1.22 trillion by 2030-fueled by Industry 4.0 adoption and urbanization-creates a favorable backdrop for companies like HLIO that are adapting to technological and regulatory shifts.

However, risks remain. High capital expenditures and raw material volatility could pressure margins, while the electro hydraulics market's reliance on innovation means HLIO must continue investing in R&D to maintain its competitive edge. The recent pullback in November 2025, though modest, highlights the stock's sensitivity to macroeconomic concerns and sector-specific challenges.

Conclusion

Helios Technologies' valuation multiples, while elevated relative to its immediate peers, appear justified by its operational performance and strategic positioning in a high-growth sector. The recent stock price pullback may present a buying opportunity for long-term investors who believe in the company's ability to navigate near-term challenges and capitalize on the electro hydraulics and industrial machinery booms. As the sector evolves, HLIO's focus on core businesses and margin expansion will be critical to sustaining its premium valuation.