Palantia Technology is grossly underrated

Palantia's value is rooted in its strong growth. The company reported on 2/5 that sales for the fourth quarter of 2023 increased 20% compared to the same period last year, and also increased 9% compared to the previous quarter.

Furthermore, the company showed strong growth in 2023, up 17% year over year. As can be seen in the graph below, Palantir has continued to experience good growth.

Analysts expect sales to increase significantly in the future. For example, according to the average forecast of analysts surveyed, sales in 2024 will increase 20.40% from $2.23 billion in 2023 2.68 billion dollarsIt has been shown to grow into

1.Strong profit and free cash flow

Palantir is already highly profitable, and this growth could further increase its value. Adjusted operating income for the fourth quarter was $2935 million, or 34% of quarterly revenue of $6835 million.

Importantly, the adjusted free cash flow was $3475 million, which represents 50% of quarterly earnings. Also, the adjusted free cash flow margin for the full year of 2023 was 32.8.% (or $730.5 million compared to sales of $2.23 billion).

2.Evaluate Palantir using FCF revenue metrics

One way to assess Palantir's value is to assume that Palantir is paying all of its free cash flow as dividends. If that happens, there is a high possibility that the dividend yield on the same stock will be at least 1.50%. This is known as the FCF yield index for evaluating stocks.

3.Set target prices

A 50% appreciation of Palantir's stock over Microsoft means that the free cash flow multiple will be 70 times higher than Microsoft's 46.80 times. This is equivalent to using an FCF yield of 1.42% (that is, the inverse of 70x).

Thus, using Palantia's adjusted FCF estimate of $1 billion, this means the stock could be worth $70 billion. This is 29.60% higher than the current market capitalization of 54 billion dollars.