Always forward multiples, never trailing ones. Palantir likely trades on Enterprise Value / NTM Revenue (next 12 months).
Don't just take the average provided by something like Yahoo Finance. You need to look at which analysts are providing estimates, decide which of those analysts are reliable (e.g. a Bank of America analyst can be trusted, a Morningstar bot that writes research reports cannot), write down all their estimates, take either the mean or average
Because few analysts provide quarterly estimates, you need to use annual estimates instead. But the next twelve months are going to be made of some part of 2024 plus some part of 2025. Palantir's fiscal year is 12/31/2024 so it's a bit less annoying to calculate.
Their most recently reported quarter was Q2 2024, so the next 12 months = Q3 2024 + Q4 2024 + Q1 2025 + Q2 2025[1].
Then you have to calculate enterprise value, which is easier said than done. In a nutshell, it's the total equity value + debt - cash, but there are always minor things to adjust. Equity value is the number of diluted shares outstanding[2] multiplied by today's share price. To calculate diluted shares, you will need to know the options that are outstanding on the company and use the Treasury Stock Method to assume all of the in-the-money options are exercised, with the proceeds from those options being used to buy back shares. Debt you can get from financial statements, unless the company has publicly traded debt in which case you might need to adjust for its current value rather than its book value. Cash you can simply get from financial statements, but there can be issues there too depending on how complex the company is. Add all of that together (subtract cash!) and you get Enterprise Value.
Divide Enterprise Value by NTM Revenue and you'll get a revenue multiple for this company today. But if you want to calculate what the company _should_ be worth relative to competitors, you can do the same thing for all of its competitors, then take the mean/average EV/Revenue of those comps and say "PLTR should be worth this much"
Also separately you can build a DCF if you have sufficient visibility into the future cashflows of the company.[3]
You can take some shortcuts or go even deeper in all of the above. It comes down to how much scrutiny you need for the investment you're making. Are you SAP trying to acquire Palantir? You're going to do all of the above with more detail than I explained. Are you deciding whether to rebalance a bit of your portfolio out of Palantir as an individual trader? Maybe Yahoo Finance Pro estimates are serviceable enough (I wouldn't know).
OR just find an analyst whose views on the company you happen to like and who you think is generally right and look at their multiples so you don't have to do all that legwork yourself. But you'll need to be a client at their bank to get access to their research...
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[1] Some people like to do (days left in 2024 / 365) * FY 2024 estimates and take the remaining days to make up a year * FY 2025, but that's totally wrong for many reasons, the most obvious being that investors aren't updating their models (and thus the valuation multiples those models output) on a daily basis. There's no new news about the company every single day, so estimates should be stable over the course of the quarter.
[2] NOT from the earnings report, as that "diluted shares" for EPS means something else: to simplify, it means diluted over the course of the year rather than today, which is what we want.
[3] For fast growing companies, this is harder because you need to extrapolate all the way until you get to a year with relatively low growth cash flows in order to get to a "terminal year" for a DCF analysis, but if you're projecting 10-20 years into the future, chances are you're wrong!
I remember reading an interview with a British author, it might have been Neil Gaiman. He was just about to get his first book published in the US, and the American publisher contacted him and asked if it was OK if they changed a couple of British words to American, like "flat" to "apartment". Not wanting to risk the publishing deal, they said sure. A couple of month later they got the first edition of the US version back and found lines like.
In the late 80's, heading into the early 90's I was working in manufacturing. Paid poorly, but man! I love that work. Had a great time, worked with people who had real skills and built up a set of my own too.
Saw the outsource waves coming hard. They were big and they were going to gut manufacturing. We all talked about it.
Few of us really did anything about it. I was one of the ones who did.
I started networking. Got out there, started having lunches with people, attending various groups, all sorts of stuff.
Fast forward today: I'm running a startup with a partner doing work with metal additive technologies after a 25 year run in CAD / PLM. Back to manufacturing as an reshoring wave is headed our way. For many doing the work the pay is still not great, but more opportunities are out there now than there have been for a long time.
My peers from that time period are mostly doing the same work, for almost the same pay ( and if that doesn't speak to some troublesome economic policy, I do not know what does ), or are employed in other fields.
A few of us moved up and into another class basically.
Lucky? Hell yes!
But, had I not done the networking, I know absolutely I would not be in the position I am in today.
In a basic sense, this all works a bit like a lottery or raffle. Consider each interaction with others a ticket.
The game is going to reward X number of tickets. And Y tickets may be rewarded due to unplanned opportunity happening as a result of a group of people realizing something is an opportunity that they would not have realized apart or in a different context.
There are Z tickets total, let's say.
People who are active in this way, talking with others, helping others out, seeking help, and doing projects, whatever they can do, get a lot more tickets than most people do.
And because of that they seem more lucky because more of them find opportunity than the baseline people not so active do.
Now, I have one other thing to say and that is about the "do what you love and money will follow" many people say is really only applicable to well off people who are somehow enabled to do what they love because their basic needs are covered somehow, or put another way, they are just not needy which frees them up to explore what they love.
The truth is many of us can do what we love and money will follow, but it's hard work!!
What I did was work my job and put 20 percent of my free time into "hobbies" that were skill builders toward "what I love" and that activity coupled with the networking and helping others is what got me a lot of those raffle tickets to better opportunities!!
I spent a ton of time doing electronics and programming on my own. A lot of it was retro computer based because I love retro computing. That 8 bit era is so damn much fun! I still love it. But, I also used it as a vehicle to build skills I would need later on, and it all worked out. Working on bigger systems helped too. I didn't put all my time into 8 bitters. I had SGI unix systems purchased off ebay, a couple pretty good Linux machines assembled from parts I got many different ways. And I setup an electronics lab made of second hand gear, some things I made myself, and a few gifts from people or trades I got helping others out too.
When opportunity presented itself I knew enough to be able to go for it and knew enough people to get help too.
Don't get me wrong. I've been lucky. Others I know will own their own luck too. ( in comfortable conversation )
But, I also maximized my chances. The cost was a bit less free play time than my peers had, but really it was also time I really enjoyed because it was invested in things I love to do and that really interest me. Mostly, I didn't catch as many movies and as many parties. No joke!
But, I had many more interesting lunches meeting great people doing all sorts of stuff!!
I am nor sure that was a cost as much as it was just living differently.
To sum up:
Sometimes a person gets noticed, or a co-worker can lend a hand up. This happens sometimes, but not too often.
More often a person gets noticed when they are active among other people. This happens more often.
Getting noticed is "that person deserves an opportunity", or "I know a guy who can get this done", or, "Did you see her project? It lines right up...."
Helping others often results in those others wanting to help us in return! Not always, but pretty often.
Doing stuff results in skills, stories one can tell, reasons to talk with others, and a general increase in competency and capability.
All that type of activity is what does tend to very seriously increase one's chance of a "luck" event happening!
They are also what can very seriously improve one's ability to take advantage of a "luck" event, which is what I call an opportunity, generally speaking.
All of what I just said is what one can do when having means, available capital isn't on the table. Wasn't for me. I came from poverty.
And there is no shame in poverty. It sucks. Way too many of us are there and it's not OK. There is a policy discussion to have one day soon. And we should have already had that discussion. Like I said, we should have it one day soon.
The shame, if there is any at all, boils down to those of us able to help others out not doing it. And in like kind, those of us needing help, some opportunity, not doing things to increase our chances of seeing opportunity and being able to act on it in a meaningful way.
*Labor theory of value*
I think you are right about work not being interchangeable. It's not been that way in my experience. Some work is. Other work isn't, and people and their basic nature vary widely too.
This does imply just working hard isn't enough. I don't agree with that at all!
What you do matters. And "working hard" means doing more of the kinds of things needed to improve luck more of the time in my view.
Remember that Apple is a global empire. If you have met any of their people, they learn a kind of culture language which diverts and uncenters themselves where no one person other than Cook can be seen to represent it. Understanding their brand language starts with the idea that Apple is an ideal of perfection, and beneath it are the ideals of harmony and flow. As an ideal, Apple does not have defects. Only things and maybe the past can have defects.
These other things like bugs and vulnerabilities are external to its perfection, and so they originate elsewhere, maybe in the past, maybe as something random, but certainly something devoid of meaning when compared to the ideal and its experience. Individual products are not Apple, because they are not perfection, but they align to it, and perfection is what makes it always seem just out of reach. The Apple experience exists above and over the material bounds of memory handling and input validation, so these things are external, and in the brand language, they are only ever allowed to exist in the past. By way of example, this is why their security advisories can come off as weird to analysts who confront and solve things.
The best writers speak the language of memory, and a trillion dollar company probably has more than a few of them. Consider that 80% or more of what you believe about reality comes through one of their products, and you are in-effect entranced by them. Their responsibility is to sustain this experience of hypnotic comfort and perfection. The advisory language is reduced until there is nothing left to remove, then calibrated to cause nothing more than a small ripple in your bliss.
I've been following this debacle in the German press and I think there's a structural problem that they will struggle to dig their way out of. And by "they" I don't mean just VW, but much of European industry.
Software is simply not valued in Europe, and not because there aren't amazing developers there -- there are many. But software isn't considered important
Let's start with cars. Back before cars were just computers with wheels I was briefly involved in a software project at $SERIOUS_GERMAN_CAR_COMPANY. Mechanically their cars were outstanding -- I still drive this company's cars today. This project was some cool "by wire" stuff, all modeled in Matlab, just as the ECU code was. But it was clear that the mechanical guys were the top of the pyramid; the safety guys were all mechanical engineers with some programming experience. All the user-visible electronics (radio, controls, etc) was subbed out to a low-price bidder because "who cares about that stuff anyway?". This wasn't VW, but I have some family exposure to VW specifically and that mentality still comes through deeply: electronics are added to the vehicle, not integral. The mental and organizational rewiring will be very hard. These are not companies who believe you should "eat your own lunch before someone else comes and eats it for you". The long institutional problems seen in yesterday's post about Nokia and the "Burning Platform" memo are pervasive throughout Europe (and most places, including a lot of USA): https://news.ycombinator.com/item?id=32698044
You see this in the salaries. Sure, take-home salaries in the EU are lower than US ones in across the board, but the delta in the high value professions is extreme and quite telling. My son's partner's parents in Europe are offended by what Amazon pays him in the US because "he just works in IT". Well, he's a developer in their highest revenue area, so Amazon think it's worth investing in. Tesla cars ship with all sorts of fit and finish bugs, and are above average in mechanical problems. But ("FSD" excepted) they spend more of their attention on what really matters: treating their vehicle as a modern electronic device. But the European car companies are still stuck in the mid 20th century and make the opposite branch cut. The rest of European industry is the same.
Andreeson wrote "Software is eating the world" 11 years ago. Apparently nobody on the continent of Europe has read it. Sure, software is considered important, but it's just another part of the BOM, not something strategic.
IMHO the only countries that really understand software at both a technical and business value add level are US, AUS, Canada, China, with India less so but in that group and Japan just barely getting in. Pretty damning.
FWIW I've worked in France and Germany (and non-European countries), including some car business, but most of my career has been in the Valley (starting 38 years ago). I am not from Europe or USA so in that sense I don't have a preference for either side. I prefer living in Europe but vastly prefer to work in the US.
Lol I've seen this in action, lots of staff devs being architecture astronauts or diving super deep on a hot new technology, and meanwhile some intern is building the stupid webapp that actually gets used and makes money.
Don't just take the average provided by something like Yahoo Finance. You need to look at which analysts are providing estimates, decide which of those analysts are reliable (e.g. a Bank of America analyst can be trusted, a Morningstar bot that writes research reports cannot), write down all their estimates, take either the mean or average
Because few analysts provide quarterly estimates, you need to use annual estimates instead. But the next twelve months are going to be made of some part of 2024 plus some part of 2025. Palantir's fiscal year is 12/31/2024 so it's a bit less annoying to calculate.
Their most recently reported quarter was Q2 2024, so the next 12 months = Q3 2024 + Q4 2024 + Q1 2025 + Q2 2025[1].
Then you have to calculate enterprise value, which is easier said than done. In a nutshell, it's the total equity value + debt - cash, but there are always minor things to adjust. Equity value is the number of diluted shares outstanding[2] multiplied by today's share price. To calculate diluted shares, you will need to know the options that are outstanding on the company and use the Treasury Stock Method to assume all of the in-the-money options are exercised, with the proceeds from those options being used to buy back shares. Debt you can get from financial statements, unless the company has publicly traded debt in which case you might need to adjust for its current value rather than its book value. Cash you can simply get from financial statements, but there can be issues there too depending on how complex the company is. Add all of that together (subtract cash!) and you get Enterprise Value.
Divide Enterprise Value by NTM Revenue and you'll get a revenue multiple for this company today. But if you want to calculate what the company _should_ be worth relative to competitors, you can do the same thing for all of its competitors, then take the mean/average EV/Revenue of those comps and say "PLTR should be worth this much"
Also separately you can build a DCF if you have sufficient visibility into the future cashflows of the company.[3]
You can take some shortcuts or go even deeper in all of the above. It comes down to how much scrutiny you need for the investment you're making. Are you SAP trying to acquire Palantir? You're going to do all of the above with more detail than I explained. Are you deciding whether to rebalance a bit of your portfolio out of Palantir as an individual trader? Maybe Yahoo Finance Pro estimates are serviceable enough (I wouldn't know).
OR just find an analyst whose views on the company you happen to like and who you think is generally right and look at their multiples so you don't have to do all that legwork yourself. But you'll need to be a client at their bank to get access to their research...
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[1] Some people like to do (days left in 2024 / 365) * FY 2024 estimates and take the remaining days to make up a year * FY 2025, but that's totally wrong for many reasons, the most obvious being that investors aren't updating their models (and thus the valuation multiples those models output) on a daily basis. There's no new news about the company every single day, so estimates should be stable over the course of the quarter.
[2] NOT from the earnings report, as that "diluted shares" for EPS means something else: to simplify, it means diluted over the course of the year rather than today, which is what we want.
[3] For fast growing companies, this is harder because you need to extrapolate all the way until you get to a year with relatively low growth cash flows in order to get to a "terminal year" for a DCF analysis, but if you're projecting 10-20 years into the future, chances are you're wrong!