Investing in stocks comes with the risk that the share price will fall. Unfortunately, shareholders of Palantir Technologies Inc. (NYSE:PLTR) have suffered share price declines over the last year. In that relatively short period, the share price has plunged 57%. Palantir Technologies may have better days ahead, of course; we've only looked at a one year period. Furthermore, it's down 24% in about a quarter. That's not much fun for holders. However, one could argue that the price has been influenced by the general market, which is down 15% in the same timeframe.
While the last year has been tough for Palantir Technologies shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.
Palantir Technologies wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last twelve months, Palantir Technologies increased its revenue by 37%. We think that is pretty nice growth. Meanwhile, the share price tanked 57%, suggesting the market had much higher expectations. It may well be that the business remains approximately on track, but its revenue growth has simply been delayed. For us it's important to consider when you think a company will become profitable, if you're basing your valuation on revenue.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. You can see what analysts are predicting for Palantir Technologies in this interactive graph of future profit estimates.
A Different Perspective
Palantir Technologies shareholders are down 57% for the year, even worse than the market loss of 17%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. The share price decline has continued throughout the most recent three months, down 24%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. It's always interesting to track share price performance over the longer term. But to understand Palantir Technologies better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with Palantir Technologies .
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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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.
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