Government Deals Stacking Up, But Is Palantir Stock Still Worth It?

Palantir Technologies (NASDAQ:PLTR) stock surged by about 7% in Friday’s trading, after The New York Times reported that the U.S. government was expanding its use of Palantir’s flagship foundry tool across federal agencies. The company has seen over $113 million in federal government spending since the new Trump administration took office via existing contracts as well as new contracts with the Department of Homeland Security and the Pentagon. Palantir is also apparently in talks with the Social Security Administration and the Internal Revenue Service about deploying its technology. The company also won a $795 million contract from the Department of Defense in late May.

While the company is expanding its public sector footprint is a positive, we believe the stock appears attractive but volatile – making it a tricky pick to buy at its current price of around $130. We believe the stock is quite sensitive to adverse events, as its current valuation is extremely high. We arrive at our conclusion by comparing the current valuation of PLTR stock with its operating performance over the recent years, as well as its current and historical financial condition. Our analysis of Palantir Technologies along key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience shows that the company has a very strong operating performance and financial condition, as detailed below. That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative, having outperformed the S&P 500 and generated returns exceeding 91% since its inception.

How Does Palantir Technologies’ Valuation Look vs. The S&P 500?

Going by what you pay per dollar of sales or profit, PLTR stock looks very expensive compared to the broader market.

• Palantir Technologies has a price-to-sales (P/S) ratio of 91.1 vs. a figure of 3.0 for the S&P 500
• Additionally, the company’s price-to-free cash flow (P/FCF) ratio is 212.7 compared to 20.5 for S&P 500
• And, it has a price-to-earnings (P/E) ratio of 497.4 vs. the benchmark’s 26.4

How Have Palantir Technologies’ Revenues Grown Over Recent Years?

Palantir Technologies’ Revenues have grown considerably over recent years.

• Palantir Technologies has seen its top line grow at an average rate of 23.9% over the last 3 years (vs. increase of 5.5% for S&P 500)
• Its revenues have grown 33.5% from $2.2 Bil to $2.9 Bil in the last 12 months (vs. growth of 5.5% for S&P 500)
• Also, its quarterly revenues grew 39.3% to $828 Mil in the most recent quarter from $608 Mil a year ago (vs. 4.8% improvement for S&P 500)

How Profitable Is Palantir Technologies?

Palantir Technologies’ profit margins are higher than most companies in the Trefis coverage universe.

• Palantir Technologies’ Operating Income over the last four quarters was $406 Mil, which represents a poor Operating Margin of 13.0% (vs. 13.2% for S&P 500)
• Palantir Technologies’ Operating Cash Flow (OCF) over this period was $1.3 Bil, pointing to a considerably high OCF Margin of 42.8% (vs. 14.9% for S&P 500)
• For the last four-quarter period, Palantir Technologies’ Net Income was $571 Mil – indicating a high Net Income Margin of 18.3% (vs. 11.6% for S&P 500)

Does Palantir Technologies Look Financially Stable?

Palantir Technologies’ balance sheet looks very strong.

• Palantir Technologies’ Debt figure was $245 Mil at the end of the most recent quarter, while its market capitalization is $310 Bil (as of 5/30/2025). This implies a very strong Debt-to-Equity Ratio of 0.1% (vs. 19.9% for S&P 500). [Note: A low Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $5.4 Bil of the $6.7 Bil in Total Assets for Palantir Technologies.  This yields a very strong Cash-to-Assets Ratio of 80.6% (vs. 13.8% for S&P 500)

How Resilient Is PLTR Stock During A Downturn?

PLTR stock has fared much worse than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.

Inflation Shock (2022)

• PLTR stock fell 84.6% from a high of $39.00 on 27 January 2021 to $6.00 on 27 December 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 3 October 2024
• Since then, the stock has increased to a high of $131.78 on 1 June 2025

Covid Pandemic (2020)

• PLTR stock fell 53.9% from a high of $39.00 on 27 January 2021 to $17.96 on 20 December 2021, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 3 October 2024

Putting All The Pieces Together: What It Means For PLTR Stock

In summary, Palantir Technologies’ performance across the parameters detailed above is as follows:

• Growth: Extremely Strong
• Profitability: Strong
• Financial Stability: Extremely Strong
• Downturn Resilience: Extremely Weak
• Overall: Strong

Overall, Palantir’s strong recent growth and solid cash flow are impressive, but its extremely high valuation and sensitivity to downturns should give investors some pause before committing to the stock.

Not too happy about the volatile nature of PLTR stock? The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.

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