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Should you buy Palantir stock? Ticker: $PLTR

Palantir stock jumped last quarter but shares have fallen around 20% since. At the latest price the company has a market cap of 39 billion dollars. With 3 billion of cash and investments and no debt, the enterprise value is 35.6 billion.

Revenue over the last 12 months comes to just over 2.1 billion with 154 million of net income and 475 million of free cash flow. So Palantir stock is valued at 17 times revenue, 250 times earnings and 75 times free cash flow.

That’s an expensive valuation but it’s not out of line with other software businesses. ServiceNow, for example, trades at 18 times revenue while DataDog trades at 20 times revenue. The difference, however, is that both those companies have stronger revenue growth, margins and retention.

Trailing revenue growth at Palantir, for example, has decelerated to 16% while ServiceNow is 23% and DataDog is 31%. And while Palantir reports a net dollar retention rate of 106%, Datadog and Servicenow both report retention metrics over 120%.

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