What Is Palantir Actually Worth? Running the Numbers

TL;DR Palantir is a genuinely elite business — 84% gross margins, cash flow above net income, more cash than debt. But on reasonable 10-year assumptions I get a middle intrinsic value near $59, with a low of $26 and a high of $196, against a market cap of $303 billion. Great company, demanding price.

Start with the checkmarks

The only way to know what Palantir is truly worth is to stop guessing and run the numbers, so that's what I did.

First, the price: $303 billion. Not the share price — the price of the whole company. Next comes the metric I love most, enterprise value. When enterprise value is lower than market cap, the company has far more cash on hand than debt. It's very hard for a business to go broke when it holds more cash than debt. Picture it personally: if you had enough in checking to pay off your mortgage, car, student loans, and credit cards today, going broke would be nearly impossible. Big checkmark.

Next, free cash flow growth. Roughly $1 billion a year for the last five years, and $2.7 billion last year. Net income grew similarly, and crucially, cash flow is greater than net income — genuinely rare in business. Most investors fixate on net income; real investors watch cash flow.

Then the profit margin: about 17% a year over five years, and 44% last year. It's improving, and the big driver is an 84% gross margin. Every contract they win leaves roughly 84% as profit after direct costs. That's an incredible number that can drive the bottom line hard.

Revenue growth ran 34% a year over five years and 38% over the last one — and the best part is no acquisitions. It was all organic. On top of that, returns on capital were strong at 15.3% last year.

Then the warning signs

It's not all rosy. One metric caught my eye: the price-to-earnings-growth ratio over the next three years sits at 2.74, which is a bit high. You want it as close to 1 as possible. It essentially asks whether future earnings growth justifies today's P/E. Fast growth deserves a premium and a higher P/E — but this ratio is your check on whether that premium has gone too far.

Look at the eight pillars too: 630x five-year earnings and 290x five-year free cash flow. Those are exaggerated by how much earnings and cash flow have grown over five years, so take them with a grain of salt.

Here's one I don't like: a 26% increase in shares outstanding. That's dilution. The one bright spot — last quarter, shares actually decreased overall. Walk back through the quarterly results and the count is generally rising, but the most recent quarter dipped. It could be the start of a new trend.

Now the valuation

Start with analyst expectations: earnings per share growing from $1.34 to $6.37 over the next four years — massive. Revenue growing from $7.4 billion to $33.2 billion, more than 4x, over the same period. Massive again.

Now I combine the story and the numbers to estimate a price worth paying. The goal isn't to be a doomer who says the company goes to zero, nor a dreamer who assumes 50% growth forever. It's to accept that companies rise and fall over time and that assuming perfection is dangerous.

Here are my 10-year assumptions. Revenue growth of 15%, 20%, and 30% on the high side. Profit margin and free cash flow margin of 30%, 40%, and 55% — they hit about 51.5% last year, so 55% is plausible, but if not, 40% looks reasonable against the five- and one-year numbers. For the P/E ten years out, I used 18, 22, and 26 — starting from a market average of 15–16 and going higher for a better-than-average company. Don't anchor to the current P/E. Finally, a 9% desired return. If you only want 9–10%, buy a low-cost ETF; I never actually use 9% to buy a stock, but it shows the intrinsic value at a market return.

The output: a low price of $26, a high of $196, and a middle of $59. Make your own call on the future — but if my numbers are reasonable, the stock isn't attractive here unless the company absolutely crushes it. And I never buy a company on the assumption of perfection.

FAQ

Q: If Palantir is a great business, can I just buy it now? A: Great company and great price are different questions. The business quality is elite, but my 10-year assumptions put the middle intrinsic value near $59. Price, not quality, is the issue.

Q: What does a PEG of 2.74 tell me? A: It measures how well expected earnings growth justifies today's P/E. Closer to 1 is better; 2.74 signals the price is a bit rich relative to growth.

Q: Why does a 26% rise in shares outstanding matter? A: It dilutes existing shareholders. The one encouraging note is that shares dipped last quarter, a possible early sign the dilution is slowing.