Where Will Palantir Be 5 Years From Now? The Answer May Surprise You.

This is all impressive, but how does it give investors insight into where Palantir will be five years from now?

The market has loved Palantir’s results and bid up the stock accordingly. Palantir is now one of the most valuable software companies on the market, valued at around $270 billion. However, there’s a lot of fluff baked into Palantir’s stock right now, as it trades for an astounding 100 times sales and 618 times trailing earnings.

Those valuations are unbelievable, and not many investors can make a profit moving forward with those expectations baked into the stock. But can Palantir prove the doubters wrong? Let’s take a look at Palantir’s bull-case scenario. I’ll assume these three things:

• Revenue growth is 40% annually over the next five years (Palantir projects 31% growth for 2025 at the high end of its projection).

• Palantir’s profit margin reaches 30% (its current profit margin is 16%).

• Palantir’s share count rises by 3% annually (it rose by 7% in Q4).

Clearly, this assumes the best outcome for Palantir’s business over the next five years. But where does that leave the stock?

If Palantir achieved these numbers, its revenue would rise from $2.86 billion annually to $15.4 billion, and profits would increase from $462 million to $4.62 billion. That’s a pretty amazing run, but where would it leave the stock valued?

Those figures (combined with share count growth) would lead to earnings per share (EPS) of $1.58. Using these projections, Palantir’s stock trades at 74 times 2029 earnings. That’s still a very expensive valuation, and it would require the stock price to not rise from today until 2029.

Remember, that’s with the most bullish projections, so I think it’s safe to say that Palantir’s stock is incredibly overvalued at current levels. I expect its business to succeed over the next five years, but eventually the bubble will burst on the stock and send it back to more reasonable levels.

So, where will Palantir’s stock be in five years? I’d guess it will be valued at the same price or even less.

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Keithen Drury has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.

Where Will Palantir Be 5 Years From Now? The Answer May Surprise You. was originally published by The Motley Fool