NEWSLETTER
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They have been incredible years for shareholders in Palantir (Nasdaq: PLTR). It was made public in 2020 to $ 10 per share, ending its first day of negotiation below that price. Since then, Palantir's actions have increased 817% – including 272% Only during the past year.
Does that mean that the stock could be a bubble, or things could improve even more from here? Should I consider adding the company to my portfolio?
Strong commercial performance can work
The price has increased, but in part that reflects a booming business. Since its last year before the list (2019), Palantir has increased income by 285%.
The operational loss of more than half a billion dollars at that time had become an operational gain north of $ 300 million for last year.
The conclusion was even better: last year he saw a net income of $ 462 million, compared to a net loss of $ 588 million in 2019.
It is easy to point out radical changes in the global security environment and expand the government in many countries in the last five years as a reason for that dramatic change in Palantir numbers.
But that loses a couple of key points.
Palantir chose which markets strategically point not for accident, and has made good decisions.
Secondly, although the income has shot, the trend of income seems even more impressive. That underlines the scalable nature of the Palantir business model, which means that income could grow much faster than income.
The current assessment is difficult to justify
Even so, even if the income continues to grow strongly and earnings even more, can Palantir justify the valuation that the stock market is putting?
At the moment, the market capitalization of the technology company is a little less than $ 200 billion. Therefore, Palantir is being quoted in a price / profit ratio of 442. Even its sales price ratio is around 73.
Clearly, the market is being built on a very high growth of growth for Palantir. Very High expectations.
I do not believe that such a price can really explain the risks faced by Palantir, from rapid evolution competitors to uncertainty priorities of the key departments of the United States government that use Palantir as a supplier.
But it even departs from such risks (which I do not do as a investor), I think the valuation makes no sense.
It seems to presume that Palantir will grow at light speed. Yes, it is growing fast, but we know from the long experience of economic activity that as companies grow, it is generally difficult for them to maintain their early growth rates.
Selling for more than 70 times sales seems irrational. I do not see any value investing at such a price (but a lot of risk) and I consider that even if the Palantir business works well, that price could mean that the action falls instead of increasing from here.
I have no plans to invest.
(Tagstotranslate) category. Investing
