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hello everyone this is Victor here welcome back to the intelligent investors channel in today's video I'm going to analyze panel tier stock to see if it's a great company for long-term investing or if it's over hyped right now about two years ago I made this paneling cure stock analysis video I was embarrassed on planetary stock because there was too much hype on planetary in 20031.
during that time many investors and YouTubers were hyping parliamentary stock and speculately that volunteer May grow 10x or more and become one of the largest Mega cap stocks so many investors spot parent need a peak in 2021 I also did not like that but until always added back large stock based compensations every quarter to make the earnings look much better in my opinion using adjusted ebitda and adding bad large stock based compensations a recorder to make earnings look better is very misleading so that was why I was bearish opportunity in 2031 fast forward to today volunteer is still down more than 20 since I made the first Barrel video about volunteer in comparison both the QQQ NASA 100 ETF and the sp1 SMP function ETF they all performed here a lot during this period here to be fair volunteer did recover a lot this year mainly because of the current AI hype at the time of making this video apparently recovered more than 150 year-to-date this year now many investors who are very bonus on volunteer are better than that penalty will become much more profitable going forward also many investors are betting that that quality will benefit a lot from the large demand for alternative AI large language models or loms and other air applications that will likely transform many Industries and government agencies so in this video I'm going to talk about these topics to see if bank2 is a great business for a lot of investing or if it's an overhype AI stock right now I will talk about piling tears biggest risk and reflex pile interior's long-term growth prospects and whether I think plenty will grow 10x or more going forward parallel interior stock evaluation and right by volunteer stock if you like this video video make sure to hit the like button subscribe and turn on the notification button I will continue to make many excellent stock reviews and investing videos a week that will help you become a great Master each video usually takes me 20 to 30 hours to make so if you like this Channel and want to support it check out my patreon blog in the video description our goal is to help all members grow their stock portfolios to over seven figures over time once you become a patreon member you can follow all the stocks I'm investing for the long term and download the latest in jinxing value calculators for all the stocks I'm analyzing so you will know when a stock becomes under well you fairly well you are over while you're now also you will have access to all my latest stock ratings for all the stocks I'm analyzing the link is in the video description take a look let's start before I start I always like to talk about the biggest risk and reflex first so this is the Bears perspective where many YouTubers who are very bonus or planeteer don't talk about the risk this is a huge red flat for me if many YouTubers and investors are hyping volunteer pilot is likely over why you this is why I didn't invest in part two years ago in 2091 when piling tear stock was near the peak so here's the Bear's perspective most Bears believe that volunteer stock is still too expensive and overpriced based on Planters expected revenue and earnings growth 4p and four Ps multiples many bears May point out that particular uses adjusted ebitda I just take margins are just the earnings per share and not just a free cash flow to make the company's earnings look much better these are just the financials can be very misleading for regular investors Poland here tends to have very large stock based compensations every quarter these stylus existing shareholders ownership so this is not good for local shareholders also the biggest risk is this many bears believe that volunteers value growth has slowed down a lot in recent quarters so why do I think planetary is slightly overwhelmed now at the top of making this video apparent here has very high forward evaluation multiples for example parliamentary's 4p ratio is around 71 and it's 4 PS ratio is nearly 15.
also you can see its price to free cash flow ratio is around 100 all these ratios suggest that pumpkin will need to have very high revenue and operating income growth rates going forward to justify these high variations this suggests that volunteer is likely overwhelmed at the time of making this video this from Seeking Alpha here you can see parliamentary's 4p is expected to be around 77 in 2023 and it's 4p is expected to be around 33 by the f187.
this suggests that its current void p is way too high and it will take four to five years for its 4p to be more reasonable at around 33. we're not even factoring parenthes increase the number of shares outstanding a recorder so all these four multiples suggest that Paleteria is slightly overpriced a lot at the time we get this video if you follow Warren buff and Charlie Munger you will know that Warren buff and trolley Monker often criticize worship for using e-priter to make complete earnings look better for example Warren Buffett does not like companies using ebitda he believes that adding bad non-cash expenses such as depreciation amortization and stock based compensations can be very misleading to shareholders and think about non-cash expenses such as depreciation and stop-based compensations is a very common practice for many high-tech companies that are still in the very early gold stage like pilot year I also have the same view as World buff and Charlie Munger pile interior always uses adjust their free cash flow translate net income to shareholders just the ebitda and not just the EPS to make its earnings look much better a recorder in my opinion this is a huge red flag these adjusted financials are very misleading this because management is trying to say that these are non-cash items so therefore they are not really expenses at the time of making this video punctures Q2 earnings are not out yet so I'll show you the keyword earnings here as an example here volunteer reported a gap net income of nearly 17 million in q1 but after adding back all these items here most of them are considered non-cash expenses Pioneers are just the eBay that became much higher at 133 million the biggest non-cash expenses here are stock-based conversations depreciation and amortization and payroll taxes related to stop-based compensations if these are not real expenses to a company then what are they think about this if parent care pays cash to employees and Executives instead of stock options penalty will have much lower adjusted ebitda and much lower free cash flow a recorder here's another thing we should consider palantir is a software as a service data and in this company like most software companies found here will continue to give more stock options to employees and Executives every quarter in order to retain them this means we should expect a patented diluted shares outstanding will continue to grow for at least the next several years until palantir becomes much more profitable and starts buying back a lot of shares in my opinion this large stock based compensations or stock options are real cost to shareholders eventually volunteer will need to buy best shares if volunteer does not want to dilute 2 million shares I'd be filing his biggest risk is this penalties value growth will likely slow down going forward for example Planters family is expected to grow about 16 year per year in 2023 this is much lower than the value growth rates in the past several years if the U.S economy slows down a lot or heads into a recession over the next 12 to 24 months because of high inflation High interest rates or other negative micro headwinds I think parenters government clients may cut back their spending on volunteers Gotham platform or parent use commercial clients may cut back the Investments on planetary's Foundry platform as well as the upcoming artificial intelligence AIP platform to be fair apparently has been growing its values consistently every quarter and the company has been reducing its Gap operating losses for many quarters already also parenting has a very healthy balance sheet for example in q1 planetary had around 2.9 billion of a cash and marketable securities in comparison parenting has zero shortened rotten depths more importantly pilotier has been generated in consistent free customers for many quarters ready so this is a good indication that volunteer has been improving its margins and profitability over time but again the biggest risk I see is that planetary surveillance growth will likely slow down going forward which makes the stock overpriced if you look at the four multiples I just talked about earlier so what apparently is long-term prospects and will volunteer grow 10x from here first of all I think that both are mostly right about paneling tiers improving profits expanding margins and growing balance going forward palantir is expected to have real Gap operating income and cap net income going forward I believe planetarius rarely will continue to grow at least for the next several years this because Frontier is acquired more commercial clients in addition to government clients a crime more conscious every quarter expanding to more Industries benefiting from the increasing demand for generative Ai and releasing the upcoming artificial intelligence AIP platform that will incorporate more AI capabilities and large language models into its existing platforms based on why no puncture is one of the leading data analytics software firms in Ai and machine learning as of now there's a large demand Fortune if AEI and large language models or llms they have the potential to transform main industries so the current AI Trend in my opinion we we would likely benefit volunteer going forward however many posts believe that point here will grow 10x or even more going forward in my opinion I think volunteer growing 10x or more going for is pure speculation and it's too optimistic here's why I think palantir growing 10x or more going forward from the current market cap is not realistic particular ground tax means that it will be larger than the three largest software as a service companies such as interests Inc Salesforce and Adobe as of now if we compare volunteer's current market cap around 35 billion to the largest sales companies in the US you can see interests Inc Salesforce and adobe's market caps are around 47 times bigger than volunteer however if we compare parties free cash flow to the larger sales companies you can see interests and Salesforce and adobe's free cash flows are around 9 to 27 times larger than Planters free cash flows as of now interested Inc Salesforce and Adobe are much more profitable than found here across all the profitability measurements here we release the quickly for parenting to grow 10 eggs or more palantir will need to have much higher Revenue much higher operating income and much higher free customer than the largest three software as a service companies personally I don't think that's going to happen all these financials such as that volunteer is likely substantially overwhelming now compared to into its Inc Salesforce and Adobe many investors who are bullets on planetary are better than that penalty will be included in the S P 500 pilot your CEO Alex carp's setup volunteer is likely eligible for the sap function index even though Palm Q has a stock structure that gives the majority voting power to the founders IB volunteer will eventually be included in the sap function this because Frontier is expected to start having Gap operating income and GAP net income in most quotas going forward one of the requirements to be included in the sap function is that pontoon needs to have pause they forget their income for the most recent four consecutive quarters as well as the most recent quarter for example according to the latest guidance here palantir is expected to break even and have real have the income in each quarter throughout 2003 this is a good sign because it indicates that Panic here we likely have real Gap operating income in most quarters going forward this is why I think palantir will eventually be included in the ssmp function going forward these Assurance planetary will continue to expand margins and become more profitable now for pilot you have growing government revenue and commercial value going forward pilot here we need to offer very compelling products such as the Gotham platform for government agencies The Foundry platform for commercial clients and non-government clients and the upcoming artificial intelligence ARP platform that will bring large language models and more relative AI capabilities to volunteers commercial and government clients personally I do not have access to planetary software platforms so I wouldn't know how competitive Advantage software Technologies are compared to other competitors software for data integration visualization and analytics of course as soon as Frontier is continually innovating and creating great software platforms for clients that will solve their problems we should see Frontier will have more commercial customers more government customers higher contract value higher buildings higher total value and higher average value per customer over time so all these are very important metrics that will show how compelling but these software platforms are going forward again I don't have access to planetary software so I wouldn't know how competitive or disruptive produce platforms are compared to competitors I want to show you palantir's expected value growth rates going forward volunteering is a software as a service data analytics company similar to other software as a service companies pile interior is aiming to achieve the rule of 40 going forward the rule of 14 means that a software company like planetary should have a combinary growth rate and even a margin of 40 or higher for the business to be sustainable and profitable over the long run if a software company like planetary cannot maintain a combined when you go through an important margin of 40 percent the business may eventually have cash flow and liquidity problems you can recent earnings call parenters management said that they are striving to achieve the rule of 40 throughout 2003 and Beyond I think this is very important because it indicates that panteria's expected value growth rates should be around 20 each year if its ebitda margin is around 20 pilot tears combine money go through and even the margin should be around 40 or higher each year for the business to be sustainable and profitable over the long run if pilotier becomes more profitable later on and has a higher important margin than 20 then we can expect that upon his rent to go through it will likely slow down and drop below 20 going forward I want to show you these consensus revenue forecast here wash your NSX better Pontius Revenue group go by about 16 in 2003 and above 19 each year over the next several years if we average Alpine tears expected value growth rates palantir's average rent growth rate should be around 22 percent each year over the next several years I think these Revenue growth rates are reasonable because they are consistent with the rule of 40 I talked about earlier this is assuming Planters even better margin will be around 20 each year I think this Ram of the growth rates assumed apparently will benefit from generative AI more contrast from government and Commercial clients higher Builders and higher values per customer going forward these family growth rates also assume that there will not be a large reception in the U.S in the upcoming months in terms of eps forecast you can see planetary's EPS is expected to grow from 21 cents per share to in 2023 to 50 cents per share in 2007.
obviously it's very hard to predict practice EPS growth over the next five years especially if a panteria will have more shared dilution going forward but the important part is this the 4p is expected to drop from around 277 in 2023 to around 33 in 2027 which is still very high again this suggests that plantier is likely over while you at the time making this video I want to show you how to calculate planetary stocks interest y here so you will know when Pantry becomes undervalued fairly value or overwire you if you want this calculator you can download it from my patreon blog the link is in the video description these are the key assumptions in this calculator first I 35 pound use engines while you as its future free cash flows discounted to the present day I'm using a discovery of 12.5 here I'm using a high discount rate here because I think planetary has a lot of risks you can always use a higher discount rate here if you want to be more conservative I expect frontier's free cash flow modules should be around 18 over the next five years this is slightly higher than probably it's past 12 months free customer margin of 17 because I'm assuming that planetary's margins will be improved slightly over time based on the expected growth rates and the rule of 40 I talked about earlier I believe penalties total value will go by around 20 to 25 each year over the next several years then piling tears total value growth will likely slow down more going forward similar to other software as a service companies let's go for these three case scenarios here worst case normal case and best case scenarios under the worst case scenario we're forecasting palantiers rarely will go at a compound and will go through it Cho of 20 over the next five years if we forecast Pioneer's free cash for over the next 5 and this kind of free cash flow to the present day palantir's intrinsic value should be around 19 billion for the entire company or 8.70 cents per share I'm giving this scenario a 25 probability here under the normal case scenario we're forecasting volunteers value will go at a Siege of 22.5 over the next five years then palantiers in Cheng shui should be around 31 billion for the entire company or around 9.50 per share I'm giving this scenario of 50 probability here under the best case scenario we're forecasting volunteers value will go at a Siege of 25 over the next five years then palantirs in changing while you should be around 23 billion for the entire company or around 10 dollars per share I'm giving this scenario a 25 probability here if you add all these numbers here penalties interests while you should be around 9.50 per share I also use the four parts to sales Evolution model here to ask the Mechanicals in change value which should be around 26 billion for the entire company or almost 12 dollars per share if you take the errors of both versions here volunteers intrinsic value should be around 10.68 cents per share just to compare Morningstar estimated pointers interested while to be much lower as nine dollars per share this means I believe volunteer stock is likely substantially overwired at the topic in this video so will I buy pilot your stock personally I'm not planning to buy planetary stock mainly because I believe the stock is well overpriced above its intrusive business value two years ago when I made the first volunteer stock analysis video I was embarrassed on Frontier now I'm more neutral on planetary because pile interior is starting to have consist of Gap earnings and more consistent free cash flows I'm not planning to buy planetary stock because I believe it's over value more importantly there's still too much AI hype driving the stock also many investors and other YouTubers are hyping volunteer this reminds me of what happened in 2020 and 2021 where many investors were hyping planetary near the peak so I'm simply staying away from planetary now I'm not shorting the planet here I believe there are many software companies that are much better and much more profitable than volunteer for example this is one of my personal goal stock portfolios I also have other portfolios with almost the same stock and the same investing strategy this portfolio is doing very well because I've invested in some of the best business and start most competitive in their Industries I also bought many of them when they were much more underwired before if you look at this portfolio here you can see I have invested in software companies such as Microsoft Adobe interest Inc and Salesforce I like this businesses much more because they are already profitable and they are the best in their Industries they have large economic modes great products and services great return on investor Capital increasing earnings and increasing free cash flows over time more importantly they are the best and the most competitive in the markets it's very hard for competitors to compete with them so instead of chasing a potential 10x gold stocks like planeteer or other hyper gold stocks I like to invest in the best businesses that are really profitable and that are most competitive in their Industries more importantly I like to buy them only when their stocks are below the interested business values in order to reduce risk personally these long-term investing strategy has worked really well for me for many years now all these are only my opinions and my Learners that's based on my research they are not Financial wise there are always risks associated with investing you will need to do your own research and do your extra duties first before investing in anything thank you for watching this video and supporting our Channel this Victor from the intelligent research Channel and I will see you in the next video
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