The Growth That Has to Land for Palantir Stock to Make Sense
The software firm’s shares look expensive, but a look at future earnings reveals a very different picture.
At a glance, Palantir Technologies (PLTR) stock looks prohibitively expensive. Trading at about 129.0 times its last twelve months of reported earnings, it’s the kind of price tag that causes most investors to stop looking. But for a patient holder, that’s not the price they’re really paying.
Look two years out, and the picture changes completely. On the earnings analysts expect by 2027, today’s share price of about $122.92 is a multiple of just 60.9 times. That’s a 53% lower multiple, a steep discount that materializes as earnings grow into the price. This is the forward valuation discount: what you pay today for the profits of tomorrow. It’s worth noting that part of this drop comes from comparing trailing reported (GAAP) earnings to forward consensus (non-GAAP) earnings, which are often higher, but the underlying growth story is still powerful.
Is the Growth Believable?
The honest question is whether the growth that produces this discount will actually arrive. Analyst consensus projects revenue will grow about 47% a year for the next two years. That might sound ambitious, but it’s actually well below the 68% growth Palantir just delivered over the past year, or the 85% it posted in its most recent quarter.
Even more telling, management’s own guidance corroborates the high-growth outlook. On its latest earnings call, the company raised its full-year 2026 revenue guidance to a level representing 71% year-over-year growth. In this case, analysts are forecasting more cautiously than the company itself. The engine behind this is surging demand for its Artificial Intelligence Platform (AIP), particularly in the U.S., where commercial revenue recently grew 133% year-over-year. The challenge, which management acknowledges, is scaling to meet this opportunity. The CEO noted on a recent call that the company’s biggest problem currently in the U.S. is that they just cannot meet demand with a very small sales force.
And Palantir Technologies is far from alone: which 10 S&P 500 stocks carry the biggest hidden forward discount? Our rankings sort the entire index by how little you are really paying for each name’s growth once the out-year earnings land.
The Margin of Safety, and the Path to a Return
A stock priced for this kind of growth is sensitive to sentiment. In past market shocks, the shares have fallen as much as 64% from peak to trough, so patience is required. The discount provides a cushion, not a guaranteed gain.
If the price simply holds steady as earnings grow, the multiple compressing to 60.9 times just proves you haven’t overpaid. That’s your margin of safety. The actual reward requires the market to keep valuing the company richly as those earnings materialize. For instance, if the multiple settles around 95.0 times those 2027 earnings, midway between today’s trailing multiple and that forward floor, the stock would be about 56% higher than it is today.
The Price You’re Really Paying
The premium you see today is not the price a long-term holder is effectively paying. On the out-year earnings, that same price implies a much more ordinary multiple for a high-growth software leader. This dynamic, where a premium valuation is backed by premium growth, is a common theme for market leaders. It’s a reminder that sometimes the best house on the block costs the most for a reason.
If the growth arrives, you haven’t overpaid. If the market keeps rewarding that growth with a premium multiple, the stock compounds with it. The key metric to watch is U.S. commercial revenue growth. As long as that engine is firing, the story behind the valuation discount remains on track. It leaves you wondering how many other high-flying stocks look this reasonable once you account for the growth priced in.
Own The Growth Without Overpaying
Whether you already hold Palantir Technologies or you are weighing it now, the appeal is not that the stock is secretly cheap today. It is that you are not overpaying for the growth: on the earnings analysts expect two years out, you are paying an ordinary multiple, even if the price never moves.
The upside sits on top of that. If the market keeps paying anything close to today’s multiple as those earnings actually arrive, the price compounds with them. The one catch is that it all rides on a single company’s numbers coming through. And if it is exposure to software as a whole you want rather than this one name, a software ETF like IGV covers that theme, though that still leaves you riding a single slice of the market. That is why the Trefis High Quality (HQ) Portfolio does not lean on any single name: it uses this same valuation-discount discipline to size a measured allocation to strong growth like this, inside a diversified set of 30 high-conviction stocks, rebalanced as the estimates change and with a track record of outpacing a benchmark that combines the three major indices – the S&P 500, S&P Mid-cap, and Russell 2000.