Palantir has been on fire lately. In the past six months alone, the company’s stock price has rocketed 115%, reaching $92.42 per share. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is it too late to buy PLTR? Find out in our full research report, it’s free.
Why Are We Positive On Palantir?
Started by Peter Thiel after seeing US defence agencies struggle in the aftermath of the 2001 terrorist attacks, Palantir (NYSE: PLTR) offers software as a service platform that helps government agencies and large enterprises use data to make better decisions.
1. Billings Surge, Boosting Cash On Hand
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
Palantir’s billings punched in at $882.6 million in Q4, and over the last four quarters, its year-on-year growth averaged 25.7%. This performance was impressive, indicating robust customer demand. The high level of cash collected from customers also enhances liquidity and provides a solid foundation for future investments and growth. 
2. Projected Revenue Growth Is Remarkable
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite, though some deceleration is natural as businesses become larger.
Over the next 12 months, sell-side analysts expect Palantir’s revenue to rise by 31%, an improvement versus its 22.9% annualized growth for the past three years. This projection is eye-popping and suggests its newer products and services will fuel better top-line performance.
3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Palantir has shown terrific cash profitability, driven by its lucrative business model and cost-effective customer acquisition strategy that enable it to stay ahead of the competition through investments in new products rather than sales and marketing. The company’s free cash flow margin was among the best in the software sector, averaging an eye-popping 43.6% over the last year.
Final Judgment
These are just a few reasons why Palantir ranks highly on our list, and after the recent rally, the stock trades at 61.2× forward price-to-sales (or $92.42 per share). Is now a good time to buy despite the apparent froth? See for yourself in our full research report, it’s free.
Stocks We Like Even More Than Palantir
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