Net Present Value (NPV) is a powerful tool for evaluating a stock’s intrinsic value by estimating the total value of its future net income and discounting it back to the present. By using this methodology, investors can assess whether the current market price of a stock reflects its true potential or if it is overvalued.
Palantir: Table of 10 Years’ Future Revenues, Future Net Income and Net Present Value
| Year Ending | Years Later |
Revenue Growth Rate |
Revenue | Profit Margin | Net Income | NPV |
| 12/23/2025 | 1 | 30% | $3,440 | 25% | $860 | $782 |
| 12/23/2026 | 2 | 30% | $4,472 | 25% | $1,118 | $924 |
| 12/23/2027 | 3 | 30% | $5,814 | 25% | $1,454 | $1,092 |
| 12/23/2028 | 4 | 20% | $6,977 | 20% | $1,395 | $953 |
| 12/23/2029 | 5 | 20% | $8,372 | 20% | $1,674 | $1,040 |
| 12/23/2030 | 6 | 20% | $10,047 | 20% | $2,009 | $1,134 |
| 12/23/2031 | 7 | 12% | $11,252 | 15% | $1,688 | $866 |
| 12/23/2032 | 8 | 12% | $12,602 | 15% | $1,890 | $882 |
| 12/23/2033 | 9 | 12% | $14,115 | 15% | $2,117 | $898 |
| 12/23/2034 | 10 | 12% | $15,809 | 15% | $2,371 | $914 |
| 10-Year Total | $92,900 | $16,577 | $9,485 |
| Gross Value | NPV | ||||
| Total of 10 Years’ Earnings | $16,577 | $9,485 | Current Market Cap | $182,880 | |
| Terminal Value | $31,617 | $12,190 | Net Present Value | $21,675 | |
| Total Value of NVIDIA | $48,194 | $21,675 | Rate of Return | -88.1% |
Net Present Value (NPV) is a powerful tool for evaluating a stock’s intrinsic value by estimating the total value of its future net income and discounting it back to the present. By using this methodology, investors can assess whether the current market price of a stock reflects its true potential or if it is overvalued.
Let’s take Palantir Technologies (PLTR) as an example: what is Palantir worth to an investor today?
Assumptions for Analysis:
| Revenue Growth | Profit Margin | |
| Years 1-3 | 30% | 25% |
| Years 4-6 | 20% | 20% |
| Years 7-10 | 12% | 15% |
- Terminal Value: $31.6 billion, double the revenue in year 10
- Discount Rate: 10%
Using these assumptions, we calculated Palantir’s 10-year total revenues, net income, and terminal value. The net present value (NPV) of these projected earnings and terminal value equals $21.7 billion. However, Palantir’s current market capitalization stands at $183 billion—nearly 8.5 times the estimated NPV.
Conclusion: This stark discrepancy raises a critical question: What does the above analysis say about the probability of making a profit on Palantir for investors who buy or hold its stock today?
It highlights the importance of assessing whether a company’s current market price justifies its future earnings potential. For Palantir, the analysis suggests that the stock may be significantly overvalued, posing considerable risks to investors. Understanding these dynamics can help investors make more informed and prudent decisions.
For further information, contact me at Equity Risk Sciences: Raymond Mullaney, CEO ray@ers.ai