Software - Infrastructure
Published on August 17, 2024, by Mark Pukhov
Palantir Technologies Inc. is an American company that develops software platforms for government and commercial sectors,
enabling large-scale data, decision, and operations integration.
After a significant decline in 2022, Palantir stock has rebounded, delivering returns far exceeding those of the S&P 500 index over the past 5 years (95.05%).
4Y:
220.80%
ALL:
220.80%
PLTR's profit margins (%) for the past 4 years:
80.62
78.56
77.99
67.73
2020
2021
2022
2023
-107.41
-26.66
-8.46
5.39
-106.75
-33.75
-19.47
9.77
Palantir's ROE and ROA (%) for the past 5 years:
6.25
-14.46
-22.71
-76.61
2020
2021
2022
2023
-43.35
-16.02
-10.72
4.81
It went down due to lower-than-expected earnings. But, its sales have improved over time, and so has the stock price.
2.22
1.91
1.54
1.09
2020
2021
2022
2023
Now that we have reviewed Palantir's historical performance, it's time to assess its other key performance indicators (KPIs) to determine whether its stock is a buy or a sell.
Palantir's PE ratio is 4.87 times higher than the software infrastructure industry average of 38.78, surpassing the typical value investor threshold of 15-20.
trailing
188.82
PE:
Its price-to-sales ratio is also higher than the industry average of 9.30 and exceeds the typical value investor's threshold of 2.
Ps
28.98
trailing
Following the trend, PLTR's price to free cash flow ratio is 2.76 times higher than the industry average of 37.31,
trailing
103.16
exceeding the value investor's threshold of 10.
p/FCF
PLTR's price-to-book ratio is not the highest in the software infrastructure industry, like PB of iLearningEngines (211.01),
17.72
but it still exceeds the threshold of 1 that investors prefer.
mrq
pB
The last KPI that we'll look into is PLTR's intrinsic value (IV). Ideally, its market price should be lower than its intrinsic value.
As expected, the intrinsic value of Palantir is much lower than its current market price of $32.08, indicating that the stock is overvalued.
$7.25
$9.66
While these values leave no margin of safety, it doesn't mean the stock is bad because except for the gross margin, all other metrics show steady growth.
So let's assess potential risks to ensure this continues:
1. Increasing expenses.
2. No revenue growth.
3. Seasonality.
4. Third-party products and services dependency.
5. High customer expectations.
While there are other risks, such as competition and management issues, most of them are speculative. Let's now take a look at what analysts are saying about the stock.
“While Palantir seems like a quality company, ... the stock has become too expensive. Investors may want to wait for a pullback to buy shares.”
#1
“Palantir stock has received a consensus rating of hold. The average rating score is and is based on 12 buy ratings, 24 hold ratings, and 19 sell ratings.”
#2
EPS (TTM): $0.17
EPS (nY): $0.42
According to Finviz.com, next year's EPS is expected to increase by over 150% compared to the current values.
As for the stock price of Palantir, analysts at 247Wallst.com expect it to be $31 in 2025. CoinCodex.com predictions indicate that it will reach $235.94 by 2030.
Seeing how high Palantir stock might go in the future is tempting, but in my opinion, the stock is currently overvalued, has a short financial history, and overall doesn't look like a buy.