Palantir Technologies Inc. (PLTR) develops and implements software tools for the intelligence community to assist with terrorist investigations and operations. Recently, the company was selected by the Centers for Disease Control and Prevention (CDC) to enhance its role as a trusted technology partner in the federal COVID-19 response by supporting crucial distribution and supply-chain operations.

However, the stock dropped nearly 15% after the company reported a net loss in the recent earnings release and failed to meet the consensus earnings estimate. While the company's core government segment exhibited solid growth, the lack of profitability and premium valuation continues to impact investor sentiments.

The company's shares have retreated 61% over the past year and 49.3% over the past three months to close yesterday's trading session at $10.43. The stock is currently trading 64.4% below its 52-week high of $29.29, which it hit on September 17, 2021.

 Here's what could shape PLTR's performance in the near term:

Mixed Financials

PLTR's revenue increased 34.4% year-over-year to $432.87 million for the three months ended December 31, 2021. Its cash and cash equivalents grew 13.9% for the year ended December 31, 2021, to $2.29 billion.

However, its operating loss came in at $58.94 million. The company's net loss increased 5.3% from the prior-year quarter to $156.19 million, while its loss per share amounted to $0.08 over this period.

Mixed Profitability

PLTR's trailing-12-months gross profit margin of 77.9% is 57.3% higher than the industry average of 49.6%. Also, its trailing-12-months levered FCF margin of 30.8% is 202.6% higher than the industry average of 10.2%.

However, PLTR's trailing-12-months CAPEX/Sales multiple of 0.82% is 63.7% lower than the industry average of 2.26%. Also, its trailing-12-months ROA, net income margin and ROC are negative 16%, 33.8%, and 11.3%, respectively.

Stretched Valuations

In terms of trailing-12-months non-GAAP P/E, the stock is currently trading at 52.67x, 167.8% higher than the industry average of 19.67x. Also, its forward EV/Sales multiple of 9.35x is 162.9% higher than the industry average of 3.56x. Moreover, PLTR's forward Price/Sales of 10.43x is 214% higher than the industry average of 3.32x.

POWR Ratings Reflect Uncertainty

PLTR has an overall C rating, which equates to a Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. PLTR has a D grade for Value and a C for Quality. The company's higher-than-industry valuation is in sync with the Value grade. In addition, PLTR's mixed profitability and financials are consistent with the Quality grade.

Of the 23 stocks in the F-rated Software – SAAS industry PLTR is ranked #13.

Beyond what I've stated above, you can view PLTR ratings for Growth, Momentum, Stability, and Sentiment here.

Bottom Line

While the company continues to exhibit solid growth in government contracts and various other collaborative projects, its lack of profitability is a cause of concern. In addition, the company failed to meet analysts' earnings estimates in the recent quarterly report, which led its stock to witness a significant price decline. Moreover, the stock looks overpriced at current valuations, despite reporting a loss in the last quarter. Therefore, we believe investors should wait before scooping up its shares.

How Does Palantir Technologies Inc. (PLTR) Stack Up Against its Peers?

While PLTR has an overall C rating, one might want to consider its industry peers, MiX Telematics Ltd. (MIXT), The Sage Group Plc (SGPYY), and Descartes Systems Group Inc. (DSGX), which have an overall B (Buy) rating.

PLTR shares fell $0.19 (-1.61%) in after-hours trading Thursday. Year-to-date, PLTR has declined -35.04%, versus a -9.82% rise in the benchmark S&P 500 index during the same period.

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.

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