• Wondering if Palantir Technologies at US$136.60 is still reasonable value or already pricing in the story you have in mind? This article walks through what the current share price might be telling you about expectations built into the stock.
• Over the past week the stock is up 1.0%, although it is down 4.5% over the past month and down 18.6% year to date, while the 1 year return sits at 10.7% and the 3 year return is very large compared to where it started.
• Recent headlines have focused on Palantir Technologies as investors reassess software and AI exposed stocks. This has fed into shifting expectations about future growth and risk. Broader discussions around data security, government and enterprise contracts, and AI related workloads have all helped frame how the market thinks about what the company might be worth at current levels.
• Simply Wall St currently gives Palantir Technologies a value score of 1 out of 6, which suggests only one of six fundamental checks points to the stock looking undervalued. Next up is a closer look at different valuation approaches and then an even more useful way to interpret them as an investor.

Palantir Technologies scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Palantir Technologies Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a stock might be worth by projecting the cash it could generate in the future and then discounting those cash flows back to today.

For Palantir Technologies, Simply Wall St uses a 2 Stage Free Cash Flow to Equity model based on cash flow projections. The latest twelve month free cash flow is about $2.69b. Analyst based and extrapolated estimates suggest free cash flow could reach about $16.11b by 2030, with further projections through 2035 calculated by Simply Wall St rather than analysts.

After discounting these projected cash flows back to today in dollars, the model arrives at an estimated intrinsic value of about $148.88 per share. Compared with the current share price of $136.60, the DCF implies the stock is about 8.2% below this estimate, which points to a small potential valuation gap rather than a major mismatch.

Result: ABOUT RIGHT

Palantir Technologies is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Approach 2: Palantir Technologies Price vs Earnings

For profitable companies, the P/E ratio is a useful way to see how much investors are paying for each dollar of earnings. It lets you line up the stock against other businesses on the same earnings based scale.

What counts as a normal or fair P/E depends on what investors expect from the company. Higher expected earnings growth and lower perceived risk usually support a higher P/E, while slower growth or higher risk tend to support a lower one.

Palantir Technologies currently trades on a P/E of 143.53x. That is well above the Software industry average of 28.41x and also above the peer group average of 61.58x. Simply Wall St’s Fair Ratio framework estimates a P/E of 56.63x for Palantir Technologies, based on factors such as its earnings profile, industry, profit margins, market cap and risk characteristics.

This Fair Ratio approach can be more informative than a simple peer or industry comparison because it adjusts the target multiple for company specific attributes rather than treating all software stocks as the same. Set against the current P/E of 143.53x, the Fair Ratio of 56.63x suggests the stock is trading well above that model based estimate.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Palantir Technologies Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Simply Wall St’s Narratives give you a simple story-based framework where you set your own fair value and expectations for Palantir Technologies. You can link that story to a forecast of revenue, earnings and margins, see how that flows through to a fair value that you can compare with the current US$136.60 share price to help decide whether to act, have that view update automatically when fresh news or earnings arrive, and place it alongside other investors’ Narratives on the Community page, such as one Narrative that values the stock at US$319.28 or another at US$19.79. This allows you to see in one place how different assumptions and stories about AI, government work or commercial growth translate into very different valuations.

For Palantir Technologies, however, we will make it really easy for you with previews of two leading Palantir Technologies Narratives:

Fair value: US$141.06

Implied undervaluation versus US$136.60: about 3.2%

Revenue growth used in this Narrative: 5.97%

• Applies five different checks, including P/E, P/S, EV/EBITDA, balance sheet strength and a DCF, to anchor fair value from several angles.
• Highlights very high trading multiples on earnings and sales, which pull some fair value estimates lower, while a debt free, cash rich balance sheet pulls one model sharply higher.
• Blends all models using specified weights to reach a fair value of about US$141 per share, presenting Palantir Technologies as close to the current market price on this framework.

Fair value: US$96.00

Implied overvaluation versus US$136.60: about 42.2%

Revenue growth used in this Narrative: 26.0%

• Points to very high valuation ratios, including a P/E in the hundreds and elevated P/B and PEG readings, as signals that a lot of optimism is already reflected in the stock.
• Notes that while revenue, EBITDA and net income are all positive in the data used, the premium valuation leaves limited room for disappointments.
• Emphasizes risks around reliance on government contracts, competition in data analytics and AI, regulation, macro conditions and changing investor sentiment as potential sources of share price volatility.

Between these two Narratives and the others on the Community page, you can see how different assumptions on growth, profitability and risk translate into very different fair values for the same US$136.60 share price, and decide which story feels closest to your own view of Palantir Technologies.

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Palantir Technologies on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

Do you think there's more to the story for Palantir Technologies? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.