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Palantir stock is crashing in recent months and is now trading near its 52-week low. Of course, I've been warning investors for about a year about Palantir stock being too expensive. Ever since it started approaching $150 per share, I started my warnings to investors. And I especially highlighted those warnings when Palantir stock started reaching $200 per share.
But of course, I wasn't always bearish on Palantir stock. Back when the stock was trading between 20 and 30 and even 40 dollars a share, I was recommending the stock as a buy. And that's the way I've been with many of the stocks that I follow and that I'm bullish or bearish about. Because valuation is an important consideration for me.
When a stock gets too exciting or too expensive, I downgrade the stock and I start warning investors and I avoid those companies with overhyped valuations. The strategy has worked extremely well for me. But what about now that Palantir is trading near its 52-week low? Is it a generational buying opportunity?
An opportunity you haven't really seen with Palantir stock since the company started re-accelerating revenue growth? Well, let's take another look at Palantir, at its business, at its prospects, at its profits, and compare them against the new lower valuation to determine if now it's ne of the things that's most exciting for Palantir stock investors is that the company reinvigorated revenue growth and really accelerated revenue growth in recent years.
You can see the chart here for its revenue and you can see that slope increasing, that rate of increase increasing, that second derivative, which is something that gets investors really excited. But that's second derivative growth is something that doesn't persist. Of course, the law of large numbers makes that be an almost inevitability that the second derivative growth rates will decelerate and decrease.
But while this is happening, it gets investors really excited. It makes it difficult to value a business, and sometimes it can create this kind of hype that was one of the reasons why Palantir stock gained so much momentum. Regardless, the company has done a phenomenal job growing their revenue from 600 million in 2018 all the way up to 4.5 billion in 2025.
But what's more impressive to me, or perhaps equally as impressive, is the company's ability to improve its profits and profit margins while its revenue and generating that boom in sales. A lot of companies can reinvigorate revenue growth by offering discounts, promotions, et cetera to invigorate sales, but that hurts the bottom line because it costs the company more to generate that sales growth than the benefits accrue.
But that's not the case with Palantir. It's delivering revenue growth through innovation, where it's leading the competition by at least one step. And if you told me Palantir is two steps of the two steps ahead of the competition, I wouldn't argue against that either. The company's cash flow from operations to sales ratio hit 47.7% in 2025.
That's among the best of the best of all of the companies I'm following, and that's up from just 11.7% in 2022. Similarly, the company's operating profit margins hit 31.6% in 2025, nearly tripling from 2024 and increasing by nearly 6x from 2023. The company's been able to boost revenues without raising cost all that much.
One of its biggest cost are the forward deployed engineers that need to go into the enterprises and institutions that are harnessing Palantir's capabilities. They've been able to do that at scale and keep their cost relatively controlled even as they add new customers. Of course, one of the benefits for Palantir is also that they can generate a lot of revenue per customer.
They have roughly 1,000 customers in total and they're generating nearly $5 billion in in annualized revenue. So, that allows the company to grow with less constraints because they're generating more revenue per customer and that limits the constraints on growth. So, I mentioned the company's acceleration in growth and it really started in 2024 where the company's revenue growth rate accelerated to 29% up from 16.7% in 2023.
That figure jumped again to 56% in 2025 and the analysts that are following Palantir and according to the management team's forecasts, the estimates suggest that the company will generate 72.5% growth here in 2026. [snorts] So, that would be several consecutive years of revenue growth acceleration. However, the analysts on Wall Street that are following Palantir expect this will be the final year of revenue growth acceleration at least in the near term.
This will be a local peak. Perhaps it could be even the bigger peak in longer-term revenue growth trajectory for Palantir. The analysts are forecasting 44.7% in revenue growth in 2027 and then in a further deceleration in 2028 revenue growth of 43%. So, just like revenue acceleration creates investor enthusiasm, revenue deceleration creates the opposite and it's the biggest reason in my opinion that Palantir stock is down.
As long as a company continues generating accelerating revenue growth, it makes it difficult to value. How much is it revenue going to grow next year? It's difficult to estimate when a company keeps growing the rate of increase. It creates really exciting things for valuation models when you're forecasting increasing revenue growth, and investors don't want to miss out on the downside.
So, perhaps they buy companies that have those kinds of growth trajectories, even though they might look expensive at the moment. And then on the downside, you have the opposite effect. As revenue growth rates are decelerating, investors are fearful. How much lower can this go? Will the company's revenue growth rate fall from 40% down to 20% in 2029?
Will it fall to 10%? 5%? Will it turn negative? Right? All of those questions come into play when a company's revenue growth is decelerating. But when a company's growth rate is accelerating, nobody is asking those questions. Nobody is asking the question, can the company's revenue growth turn negative in 2 years?
Will the company's growth turn into and fall into the single digits? Right? Nobody's even mentioning those questions. But when your revenue growth is decelerating, now those questions are coming into play because they're more probable and more possible, even if they're not very likely. So, of course, starting in the middle of last year when I started warning investors about Palantir stock being too expensive, that's when the valuation was up here.
On a forward price to earnings and forward price to operating cash flow approaching 150, 160, and at times it was trading at forward price to earnings ratios and forward price to operating cash flows ratios well above 200. These are very expensive valuations, and even though Palantir is an excellent business, as I shared with you incredible revenue growth accelerating, incredible margins, operating in an AI industry, at least one step, arguably two steps ahead of the competition, a massive total addressable market opportunity, etc.
etc. All great things that deserve a premium valuation. However, my argument was that this premium was a little too much. That was extreme, trading at a forward price to earnings approaching 240, 250. That's extreme. It's hard for a company to maintain that kind of valuation, and you probably notice Palantir would report fantastic quarterly results, and the stock price would still fall.
And it's because so much of that optimistic forecast had already been baked into the stock. And if Palantir didn't exceed those already extremely high expectations, it would create a little bit of a letdown for investors, who would become less and less excited. But now Palantir is trading at a more reasonable valuation.
A forward price to earnings of 83, and a forward price to operating cash flow of 66. In my opinion, this is a more reasonable valuation for a company that's growing revenue at nearly 80% here in 2026, and is generating profit margins of about 50% approaching even higher levels. So today Palantir stock, which had the intrinsic value per share increasing to $153.
Now that compares well to the current market price of $128. So according to my discounted cash flow valuation model, even after applying a margin of safety, Palantir stock looks undervalued. And this is something I haven't been able to say in a really long time with Palantir stock. It's been overvalued for such a long time, especially since the company started reinvigorating revenue growth, re-accelerating revenue growth.
And as I mentioned before, I haven't always had Palantir stock rated as being overvalued or warning investors about Palantir. When it was trading between 20, 30, 40, 50 dollars a share, I was rating this business as a great long-term investment. It's only when the share price exploded that I downgraded Palantir and started warning investors that it's too expensive.
So, I'm a little bit different in that way. I know a lot of other YouTubers you might be following are just constantly hyping up their favorite stocks, right? And Palantir has a strong following. It's one of those companies like SoFi and Tesla and now SpaceX that just has this following that has certain YouTubers that are just always supporting it, always uh cheerleading, no matter the valuation, no matter what's going on, always spinning in a positive direction.
And because of course that's what their fans want to hear, and that's what they tell their fans. But, you know, as I mentioned already, my analysis changes based on the and the market prices, and I bring that into the valuation. And as these dynamics change, my evaluation changes. So, today, for the first time in a long time, I'm saying that Palantir stock looks undervalued.
All right. So, given that fact that Palantir stock looks undervalued and it's an absolutely excellent business, I will say that I do think this is a great buying opportunity for long-term investors.
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