For more detailed analysis visit our Substack: https://www.overlookedalpha.com Palantir combines software and human knowledge to help governments and corporations solve complex problems. This is a secretive and controversial company that plays a role in global warfare, international relations, cl...

For more detailed analysis visit our Substack: https://www.overlookedalpha.com Palantir combines software and human knowledge to help governments and corporations solve complex problems. This is a secretive and controversial company that plays a role in global warfare, international relations, climate change and more. Right now, the company has an enterprise value of 14.2 billion with 2.4 billion of cash on the balance sheet and essentially no debt. Revenues of 1.7 billion dollars over the last 12 months mean the company is now trading around 8 x revenue or about 42 times free cash flow. That’s pretty steep but revenue is growing fast, clocking in at around 35 - 40% a year. Although the company guided for a profit this year, it excludes stock based compensation which was almost 300 million over just the first six months. That’s a lot, and net income over the last 12 months was negative 539 million with CEO Alex Karp saying the company likely won’t be profitable until 2025. Gross margins are also interesting because they dropped to 67% in 2019 leading some analysts to argue the company was more a consulting firm than a software company. But gross margins have since climbed back to 78%. A crucial point about Palantir is the company’s desire to diversify away from government and work with corporations. This is clearly working because commercial revenue in the US grew a whopping 120% year on year. So looking at one basic scenario, let’s say Palantir grows revenue at 20% per year for the next 10 years then trades at 18x ebitda on a 35% ebitda margin (in line with other software companies). That would result in an enterprise value of roughly 57 billion dollars from here and an annualized return of 16.6%. But there are so many moving parts, that number could be way off. Palantir is pretty hard to value because it’s a complex and secretive business. However, that complexity is a valid reason to give this stock further consideration. And commercial revenue growth provides a strong bullish argument. WIth the stock trading below its IPO price, with strong growth and no debt we think this is definitely a stock to consider further. I don’t own a position currently but I may do in the future. And remember these are my personal opinions, not financial advice. For more detailed market analysis make sure to visit our website. #shorts #investing #stocks #overlookedalpha