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yesterday we saw the majority of the S&P 500 down however one company that seems to continue to increase every single day palente is up 208% over the last 12 months in fact just year to dat they are up 23% now right now this company is trading towards its 52 we high of $63 and we want to cover the good however also some very bad issues that we have with this company in terms of investors considering this in their portfolio first things first though we do get a triple hold right across the board meaning Seeking Alpha Wall Street and Quant believe you should not be buying shares but also if you are a shelder that you shouldn't be selling them either now first thing that we want to point out that I'm sure you will have seen and stood out like a sore thumb the forward P right now for this company is trading at 160 now that is astronomically high but when we do take a look at that earnings their more recent one they are producing some very Stellar results in fact they were up just 12% on that report that they had in November the 4th and these results were very very good for shareholders in fact when we take a look their earnings per share was a nice beat 10 cents versus the nine expected as well as their revenue 726 versus the 7001 that was expected by the market and as we can see here the CEO Alias carp did mention that they absolutely eviscerated the quarter and they put this down to the unrelenting AI demand that they cannot see slowing down and neither can the market currently given that very high valuation that is put on its head now we also noticed their revenue is up 30% year onye in the quarter and their net income has pretty much doubled from the same quarter last year 144 million versus the 71.5 that we saw in 2023 and some other points that Alex cob does talk about in his letter to shareholders he says the growth of the business is accelerating their financial performance is exceeding expectations as they meet an unwavering demand for the most advanced AI Technologies from the US government but also their commercial customers now the good news doesn't stop there with this company because when we do take a look at that latest investor presentation their Gap net income just continues to climb higher and higher every single quarter and this is fantastic news if you are someone who is an investor or in fact if you are someone that has been one of those early shareholders who was buying well before this runup that we do see we also look at their operating income again looking very good on a quarter by quarter basis moving in the right direction that we want to see and as we already mentioned in that essential earnings report up 30% on their Topline Revenue we can also see their operating margin increasing and remember on this channel one thing that we like to see for high quality companies yes increase in revenue is fantastic but we also want to see are there any efficiencies to the operating margin the net income margin gross margin and as we can see here in Q3 so the same quarter last year their margin was 29% in the same quarter this year 38% was also being able to increase their top line so fantastic news and finally we do get to see here in terms of the number of deals closed they continue to rise in fact 16 of them in that quarter were worth at least $10 million so fantastic news for paler but as we said there are some reservations that we want to discuss and the first one if not the main one is around the valuation so when we take a look at their grading they do get an f and we also want to point out we're going to run it through our own valuation model shortly with the F this is essentially derived from the fact that their PE on a non-gaap forward looking basis of 160 is well above the sector median of 25 in fact if you're Buy palente here right now around the $60 region you are paying 537 in terms of a premium and for those that want to use other valuation metrics well as we can see you would come to the same result some a little bit higher than others but essentially bottom line palente is trading at a massive premium now don't get me wrong some companies do deserve to trade at a premium but you have to understand how much of a premium is a company worth and that is what we need to wrap our heads around with Palante here today because when we do look at the other metrics they growth grade phenomenal A+ we love that 25% a lot better than the sector median of 4% moving forwards 22% again much better than the 6% of the sector median and when we come down to the earnings per share over the next 3 to 5 years 26% a lot better than the 15 of the overall sector now that doesn't just stop there we can also see that reflecting the profitability where they did get an A and in terms of the margin well 81% versus the sector of 50% bottom line 18% versus the Seine of 3.46 and we also noticed they cash from operations over the last 12 months nearing the 1 billion Mark whereas the sector median at 95 million so yes we do get a triple hold right across the board as well as an F on valuation but as we've seen from the A+ in growth and the a in profitability this company does in fact deserve to be trading at a premium is it worth the 5 600% premium again something we do need to consider now we also want to let you know that every Monday morning we do release an article directly to your inbox where we talk about severely undervalued stocks that do deserve 40 undervalued dividend stocks for the month of Nov see over the next year as well as a spreadsheet of 22 undervalued dividend stocks that Wall Street themselves believe right now have the most upside out of the whol the other parts of our analysis of companies is looking at inside and institutional movement starting off with insiders 133% we also noticed a significant amount of Insider selling 1.5 billion over the last year which actually from memory is probably the most that we have seen on this channel 406 million in the more recent quarter of Q4 and when we take a look to see who these insiders are well we have one director who sold on the 8th of November so literally just last week in fact the CEO himself also sold a day before and he sold quite a large chunk 4 and a half million shares worth around $248 million now remember we do want to be consistent on this channel and we do believe that Insider selling isn't a bearish signal look they sell for many reasons personal or financial but again if you want to use this information in your own investment thesis you can that is a significant number of shares but again remember no one can time the top this could be just the beginning of the run or as we will come to take a look in terms of the valuation it does look to be overvalued again you can come to your own conclusions and use this in your own investment thesis when we do the same analysis but for the institutions 46% ownership 1 billion worth of sales over the last 12 months three times as much buying by the institutions again in the same time frame and we also noticed a significant amount more buying in Q3 1.2 billion versus 268 million so are the institutions loving this company yes are they bullish yes as we can see but as always do your own due diligence never copy insiders or institutions now before we jump into our own valuation let's have a refresher of some of their key metrics their free cash flow was negative in 2018 to 2020 has started to tick up in the right direction with growth expected from 23 to 2024 to around 44 C so that is always good to see now sales growth one thing we don't want is for this company to start slowing down like we have seen over the last few years because the valuation is very rich we are expecting as investors that so does the sales increase in the likely manner now 25% on a trading 12 month is a good sign hopefully this was the lows of 2023 at 17% but definitely something we need to keep an eye on as we just saw for the more recent quarter that is up 30% on the year- on-year comparative and we can see their Top Line has come up very strongly 600 million in 2018 2.23 billion in 2023 now we also have to flag in terms of shares outstanding they have been diluting your position as a shareholder over the last few years 544 million in 2018 2.41 billion in the latest quarter and as we can see this is something management do on a very consistent basis so something just to be aware of something we did think to flag now roic see what this is showing us is that when we do previously look at financial statements they were making a loss in fact 2023 3% it means a good sign 8% trading 12 a month as well so they have turned a profit and we did see that when looked at their investor slides we do ideally want to see this though at 10% minimum just to give us Faith manin we can again see that operating margin only turn positive in 2023 and based on the increase on the trading 12 month hopefully this can be sustain move in the right direction and ultimately this is what we want to see at 16% at a bare minimum so again hopefully something we can take off from 2024 onwards terms of free cash FL margin though over the last three years and on the trading 12 month looking very strong 40% again investors will love to see this then we get to the net debt to ebit Z the earnings before interest tax appreciation ammortization remember this reflects the balance sheet strength with these being what this signals to us is over the last four years on a train to a month and over the next one months it won't even take Palante so does look good now let's jump into the valuation model as always if you do enjoy the content value is being provided smash that like button hit that subscribe and Bell button so you all continually notified of these videos as they drop so our intrinsic value today comes to $41 and how we got that is the DCF model so we'll just run through that now we have the free cash flow year- on-ear negative average growth as it has gone from negative to positive a few times now we've gone for 30% moving forwards with a low medium and high rate here 25 3035 with the 30% medium and we can see here $41 intrinsic value meaning if they grow their free cash flows at 30% year onye over the next 10 years and Beyond we are looking at downside of 33% now remember these numbers are subjective and you can always but just to show you for transparency at the 25% rate moving forwards intrinsic value would be $31 meaning downside of 49% and at the 35% level we can see $54 meaning downside of 12% so even if you believe right now that it will increase by 35% year- on-year moving forwards you are still looking at an intrinsic value of $54 meaning downside of 12% now we want to take the medium rate today of 30% where typically what we like to do on this channel is put a margin of safety where we'd start off with 10% and execute by the stock given if it meets the which means right now we believe palente here is trading at a significant premium but for those that do want to know based on the information we've run through 10% MOS a bu $37 at 15% around 35 and at 20% around 33 but as we said no margin of safety and Wall Street themselves believe even lower they have the price over the next year at $35 meaning downside of 43% over the year as always though do give us your thoughts do you believe that actually no this is a buy now it will essentially evolve into its valuation do you believe it's a hold like we saw with Wall Street seeking alfr and Quant or in fact do you believe that Palante right now is a sale and this is the top for the foreseeable future we also want to let you know for those that believe this company will eventually become a 1 trillion market cap at the current price the market cap is $138 so palente if it does meet the 1 trillion space without any stock splits the values of the shares will be $442 each as always give us your thoughts in the comments below if you enjoy today's episode 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