Stock Analysis on Net
Stock Analysis on Net

Palantir Technologies Inc. (NASDAQ:PLTR)

Present Value of Free Cash Flow to the Firm (FCFF)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

Palantir Technologies Inc., free cash flow to the firm (FCFF) forecast

US$ in thousands, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 32.45%
01 FCFF0 1,141,231
1 FCFF1 940,415 = 1,141,231 × (1 + -17.60%) 710,018
2 FCFF2 891,176 = 940,415 × (1 + -5.24%) 507,999
3 FCFF3 954,670 = 891,176 × (1 + 7.12%) 410,868
4 FCFF4 1,140,690 = 954,670 × (1 + 19.49%) 370,652
5 FCFF5 1,503,952 = 1,140,690 × (1 + 31.85%) 368,962
5 Terminal value (TV5) 328,458,093 = 1,503,952 × (1 + 31.85%) ÷ (32.45% – 31.85%) 80,580,153
Intrinsic value of Palantir Technologies Inc. capital 82,948,652
Less: Debt (fair value) 0
Intrinsic value of Palantir Technologies Inc. common stock 82,948,652
 
Intrinsic value of Palantir Technologies Inc. common stock (per share) $35.37
Current share price $106.27

Based on: 10-K (reporting date: 2024-12-31).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Weighted Average Cost of Capital (WACC)

Palantir Technologies Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 249,241,036 1.00 32.45%
Debt (fair value) 0 0.00 0.00% = 0.00% × (1 – 11.15%)

Based on: 10-K (reporting date: 2024-12-31).

1 US$ in thousands

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 2,345,356,506 × $106.27
= $249,241,035,892.62

   Debt (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (4.35% + 8.32% + 21.00% + 21.00% + 1.07%) ÷ 5
= 11.15%

WACC = 32.45%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Palantir Technologies Inc., PRAT model

Microsoft Excel
Average Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Selected Financial Data (US$ in thousands)
Interest expense — 3,470 4,058 3,640 14,139
Net income (loss) attributable to common stockholders 462,190 209,825 (373,705) (520,379) (1,166,391)
 
Effective income tax rate (EITR)1 4.35% 8.32% 21.00% 21.00% 1.07%
 
Interest expense, after tax2 — 3,181 3,206 2,876 13,988
Interest expense (after tax) and dividends — 3,181 3,206 2,876 13,988
 
EBIT(1 – EITR)3 462,190 213,006 (370,499) (517,503) (1,152,403)
 
Debt, noncurrent, net — — — — 197,977
Total Palantir’s stockholders’ equity 5,003,275 3,475,561 2,565,326 2,291,030 1,522,550
Total capital 5,003,275 3,475,561 2,565,326 2,291,030 1,720,527
Financial Ratios
Retention rate (RR)4 1.00 0.99 — — —
Return on invested capital (ROIC)5 9.24% 6.13% -14.44% -22.59% -66.98%
Averages
RR 0.99
ROIC -17.73%
 
FCFF growth rate (g)6 -17.60%

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 See details »

2024 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 0 × (1 – 4.35%)
= 0

3 EBIT(1 – EITR) = Net income (loss) attributable to common stockholders + Interest expense, after tax
= 462,190 + 0
= 462,190

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [462,190 – 0] ÷ 462,190
= 1.00

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 462,190 ÷ 5,003,275
= 9.24%

6 g = RR × ROIC
= 0.99 × -17.73%
= -17.60%

FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (249,241,036 × 32.45% – 1,141,231) ÷ (249,241,036 + 1,141,231)
= 31.85%

where:

Total capital, fair value0 = current fair value of Palantir Technologies Inc. debt and equity (US$ in thousands)
FCFF0 = the last year Palantir Technologies Inc. free cash flow to the firm (US$ in thousands)
WACC = weighted average cost of Palantir Technologies Inc. capital

FCFF growth rate (g) forecast

Palantir Technologies Inc., H-model

Microsoft Excel
Year Value gt
1 g1 -17.60%
2 g2 -5.24%
3 g3 7.12%
4 g4 19.49%
5 and thereafter g5 31.85%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= -17.60% + (31.85% – -17.60%) × (2 – 1) ÷ (5 – 1)
= -5.24%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= -17.60% + (31.85% – -17.60%) × (3 – 1) ÷ (5 – 1)
= 7.12%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= -17.60% + (31.85% – -17.60%) × (4 – 1) ÷ (5 – 1)
= 19.49%