To The Moon

Fundamental Analysis: Evaluating a Company’s Health Today

Fundamental analysis is the process of assessing a company’s financial health and intrinsic value by examining its financial statements, operations, industry position, and economic environment. Unlike technical analysis, which focuses on price charts and patterns (e.g., PLTR’s $90–$97 range), fundamental analysis digs into the numbers and strategy to determine if a stock like Palantir Technologies (PLTR) at $93.78 (April 17, 2025) is worth its price, overvalued, or a bargain. For PLTR, with its sky-high P/E (~495) and recent volatility (40% drop from $125.41 peak), this approach helps decide if its AI-driven growth justifies the hype. Here’s how to evaluate a company’s health today, using PLTR as a case study.

What Is Fundamental Analysis?

Fundamental analysis answers: Is this company healthy, and is its stock priced fairly? It looks at:

Financial Statements: Income statement, balance sheet, cash flow statement (revenue, profits, debt, cash).

Qualitative Factors: Management, competitive advantage, industry trends.

Macro Environment: Economic conditions, regulations (e.g., April 2025’s tariff fears).

The goal is to estimate a company’s intrinsic value—what it’s truly worth—versus its market price ($93.78 for PLTR). If intrinsic value > price, it’s a buy; if < price, it’s overvalued.

Step-by-Step Guide to Evaluating PLTR’s Health Today

Let’s analyze PLTR’s current financial health (as of April 17, 2025) using fundamental principles, drawing on recent data (e.g., 20–29% revenue growth, $1.25B FCF) and context (NATO contract, tariff risks).

1. Analyze the Income Statement: Profitability and Growth

The income statement shows revenue, expenses, and profits over a period (e.g., last 12 months). It reveals if PLTR is making money and growing.

Key Metrics:

Revenue: Total sales. PLTR’s 20–29% growth (Seeking Alpha, April 2025) and 36% commercial surge (Yahoo, April 4) signal strong demand for its AI platforms (Gotham, Foundry).

Estimated: ~$2.4B (2024, based on growth from $1.9B in 2023).

Gross Margin: Revenue minus cost of goods sold (COGS) ÷ revenue. Tech firms like PLTR typically have high margins (~78–80%, Q4 2024 estimate) due to scalable software.

Operating Income: Revenue minus COGS and operating expenses (R&D, marketing). Positive = core business profitability.

PLTR’s likely positive but thin (growth-focused, heavy R&D).

Net Income: Profit after taxes, interest. PLTR’s ~$200M (2024 estimate) is low, reflecting reinvestment.

Earnings Per Share (EPS): Net income ÷ shares (~2.7B). PLTR’s ~$0.1886 (trailing, based on P/E ~495) is small but growing (from ~$0.05 in 2023).

PLTR Today:

Strength: 20–29% revenue growth (36% commercial) outpaces tech peers (e.g., Datadog ~25%). NATO deal (April 2025) and S&P 100 entry (March 2025) boost contracts.

Weakness: Low EPS ($0.1886) and high P/E (~495) mean profits lag price. Tariff fears (April 2025) could slow commercial sales (non-DoD).

Check: Compare to peers. Snowflake’s 30% growth but higher EPS ($0.50) suggests PLTR’s $93.78 is pricier.

2. Examine the Balance Sheet: Financial Stability

The balance sheet is a snapshot of assets (what PLTR owns), liabilities (what it owes), and equity (owner’s stake) as of today.

Key Metrics:

Assets:

Current Assets: Cash, receivables. PLTR’s ~$3–5B cash (estimated, based on $1.25B FCF) ensures flexibility.

Non-Current Assets: Patents, software (PLTR’s AI IP). Intangibles dominate—harder to value.

Liabilities:

Current Liabilities: Short-term debts. Low for PLTR (tech norm).

Long-Term Debt: Minimal for PLTR (~$0.2–$0.5B, estimated).

Shareholders’ Equity: Assets minus liabilities. Growing equity (~$3B+, Q4 2024) shows health.

Debt-to-Equity Ratio: ~0.1–0.2 (low, tech norm). PLTR’s lean debt is a plus.

Current Ratio: Current assets ÷ liabilities. >1.5 (PLTR likely ~2–3) means bills are covered.

PLTR Today:

Strength: High cash, low debt—can fund AI R&D without borrowing. $219.95B market cap (Nasdaq, April 2) backed by solid balance sheet.

Weakness: Intangible-heavy assets (AI software) risk overvaluation if growth stalls. Check 10-Q (Q1 2025, ~May) for updates.

Check: Microsoft’s ~$400B cash dwarfs PLTR but similar low debt. PLTR’s asset-light model is typical for tech.

3. Review the Cash Flow Statement: Cash Generation

Cash flow shows how cash moves—critical since profits (EPS) don’t always mean liquidity.

Key Metrics:

Operating Cash Flow: Cash from core business. PLTR’s $1.25B free cash flow (FCF, FY24) is robust, funding growth.

Investing Cash Flow: R&D, acquisitions. Negative (~$0.5–$1B, estimated) is normal for PLTR’s AI push.

Financing Cash Flow: Stock issuance, debt repayment. Minimal issuance (PLTR avoids dilution, unlike some tech).

Free Cash Flow: Operating cash minus capital expenditures. $1.25B FCF = flexibility.

PLTR Today:

Strength: $1.25B FCF is a standout—rare for growth firms with low EPS. Supports $93.78 price.

Weakness: Heavy R&D spending (investing cash) must deliver (e.g., NATO, FedStart contracts). Insider selling ($8.1M, April 3) raises eyebrows.

Check: Compare to Snowflake (~$0.8B FCF). PLTR’s cash flow edge justifies premium, but not ~495 P/E.

4. Evaluate Qualitative Factors: Competitive Edge and Risks

Beyond numbers, assess PLTR’s business model, leadership, and market position.

Competitive Advantage (Moat):

Strength: Unique AI platforms (Gotham for DoD, Foundry for commercial). 17–18% DoD revenue and NATO deal (April 2025) lock in government clients. Commercial growth (36%) taps diverse sectors.

Weakness: Faces Snowflake, Datadog in analytics. AI hype (like 2024’s 350% run) could fade if competitors innovate faster.

Management:

Strength: CEO Alex Karp’s long tenure and “build in America” push (X, April 1) align with government focus.

Weakness: Insider selling (e.g., $8.1M, April 3) hints at profit-taking, not confidence.

Industry Trends:

Strength: AI/data analytics booming (Nvidia’s $600 peak). PLTR’s S&P 100 entry (March 2025) boosts credibility.

Weakness: Tariff wars (34% China, 20% EU, April 2025) threaten global clients, though DoD focus mitigates.

5. Assess the Macro Environment

Today’s economic context shapes PLTR’s health:

Tariffs: April 2025’s scare (Dow -2,200, PLTR -13% at $71.93) hit growth stocks. PLTR’s $93.78 recovery (NATO deal) shows resilience, but renewed tariff fears could cut commercial sales.

Interest Rates: Fed hikes (2025) pressure high P/E stocks (PLTR’s ~495). Low debt ($0.2–$0.5B) helps.

Market Mood: Nasdaq’s 5.7% weekly gain (April 17) lifts PLTR, but triple top at $97.25 (X posts) warns of a pullback.

6. Key Ratios for Valuation

Combine metrics to gauge if $93.78 is fair:

P/E Ratio: 495 (trailing, $0.1886 EPS). Forward ~375 ($0.25 EPS). Sky-high vs. S&P 500 (25) or Snowflake (~200).

Price-to-Sales (P/S): ~91 (market cap $219.95B ÷ $2.4B revenue). Tech norm ~10–20—PLTR’s extreme.

PEG Ratio: P/E ÷ growth rate (~25%) ≈ 19.8. >1 suggests overvaluation.

Return on Equity (ROE): Net income ($200M) ÷ equity ($3B) ≈ 6.7%. Low vs. tech peers (~15%).

Debt-to-Equity: ~0.1–0.2. Strong safety net.

PLTR’s Health Today: Summary

Strengths:

Growth: 20–29% revenue (36% commercial) and NATO deal signal demand.

Cash Flow: $1.25B FCF funds AI without debt (low D/E ~0.2).

Moat: DoD/NATO contracts and Foundry platform lock in clients.

Recovery: $93.78 (from $71.93, April 4) shows bullish momentum (50-day SMA ~$92.56).

Weaknesses:

Valuation: P/E ~495 and P/S ~91 are unsustainable unless EPS jumps (e.g., $0.40 by 2026).

Profitability: Low EPS ($0.1886) lags price—growth must deliver.

Risks: Tariffs (April 2025), insider selling ($8.1M), and triple top at $97.25 threaten $84–$90 dip.

Competition: Snowflake, Datadog challenge commercial growth.

Verdict: PLTR is healthy—cash-rich, growing, and strategically positioned—but wildly overvalued at $93.78 unless AI contracts (e.g., NATO, FedStart) triple revenue. Intrinsic value likely $60–$80 (P/E 200–300, tech norm). Buy on dips ($85–$90) for high-risk tolerance.

Applying to Portfolio (Revisited)

Our $10,000 mock portfolio (15% PLTR at $93.78, 30% SPY, 15% JNJ, 15% KO, 10% IWM, 10% XLE, 5% cash) remains solid:

PLTR ($1,500, ~16 shares): Captures NATO/AI upside but limits risk (10% drop = $150 loss).

Blue-Chips (JNJ, KO): Hedge tariff hits (2–3% dips vs. PLTR’s 13%).

SPY/IWM: Broad exposure reduces PLTR’s P/E risk.

Performance: PLTR at $100 (+6.6%) adds $106; flat others keep total at ~$10,106 (+1.06%). A 10% PLTR drop ($84.40) cuts $150, but portfolio loses ~2% ($9,800).

How to Act Today

High Risk Tolerance: Hold PLTR at $93.78, target $100–$105 (resistance break). Stop-loss at $89.50 (support). Add on dips (~$90).

Moderate Risk: Keep 15% PLTR ($1,500), but don’t add—P/E ~495 is too rich. Favor SPY/JNJ if tariffs flare.

Low Risk: Trim PLTR to 5% ($500, ~5 shares), shift to KO (2.9% yield, P/E ~25).

Where to Get Data

SEC EDGAR: PLTR’s 10-K (2024), 10-Q (Q1 2025, ~May).

Sites: Yahoo Finance (EPS ~$0.1886, P/E ~495), Seeking Alpha (20–29% growth).

Earnings: Q1 2025 (~May) for updated revenue/EPS.

Why It Matters for PLTR ($93.78)

Fundamental analysis shows PLTR’s healthy—growing, cash-rich, AI-driven—but its ~495 P/E and tariff risks make $93.78 a speculative bet. Strong FCF ($1.25B) and NATO deals support $100 potential, but a growth miss could hit $80–$85. Pair with blue-chips (like our portfolio) to sleep easy