Today we're going to take a closer look at large-cap Technology company Palantir Technologies, whose shares are currently trading at $18.16. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!
The Market May Be Overvaluing Palantir Technologies's Earnings and Assets:
Palantir Technologies Inc. builds and deploys software platforms for the intelligence community in the United States to assist in counterterrorism investigations and operations. The company belongs to the Technology sector, which has an average price to earnings (P/E) ratio of 35.0 and an average price to book (P/B) ratio of 7.92. In contrast, Palantir Technologies has a trailing 12 month P/E ratio of 259.4 and a P/B ratio of 12.38.
When we dividePalantir Technologies's P/E ratio by its expected five-year EPS growth rate, we obtain a PEG ratio of 0.86, which indicates that the market is undervaluing the company's projected growth (a PEG ratio of 1 indicates a fairly valued company). Your analysis of the stock shouldn't end here. Rather, a good PEG ratio should alert you that it may be worthwhile to take a closer look at the stock.
Growing Revenues With Increasing Reinvestment in the Business:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $595 | $743 | $1,093 | $1,542 | $1,906 | $2,125 |
| Revenue Growth | n/a | 24.71% | 47.15% | 41.11% | 23.61% | 11.51% |
| Net Interest Expense (MM) | $3 | $3 | $14 | $4 | $4 | $37 |
| Depreciation & Amort. (MM) | $14 | $3 | $14 | $15 | $23 | $33 |
| Free Cash Flow (MM) | -$52 | $333 | -$309 | $321 | $184 | $475 |
| Capital Expenditures (MM) | $13 | $2 | $12 | $13 | $40 | $15 |
Palantir Technologies has growing revenues and increasing reinvestment in the business, low leverage, and irregular cash flows. However, the firm has consistently negative margins with a stable trend. Finally, we note that Palantir Technologies has flat EPS growth trend.
