Planet Labs has gotten torched over the last six months - since May 2026, its stock price has dropped 66.4% to $12.94 per share. This may have investors wondering how to approach the situation.
Following the pullback, is now the time to buy PL? Find out in our full research report, it’s free.
Why are we positive on Planet Labs?
Pioneering the concept of "agile aerospace" with hundreds of small but powerful satellites, Planet Labs (NYSE: PL) operates the world's largest fleet of Earth observation satellites, capturing daily images of our planet to provide insights on deforestation, agriculture, and climate change.
1. Surging backlog locks in future sales
In addition to reported revenue, backlog is a useful data point for analyzing data & business process services companies. This metric shows the value of outstanding orders that have not yet been executed or delivered, giving visibility into Planet Labs’s future revenue streams.
Planet Labs’s backlog punched in at $814.9 million in the latest quarter, and over the last two years, its year-on-year growth averaged 124%. This performance was fantastic and shows the company has a robust sales pipeline because it is accumulating more orders than it can fulfill. Its growth also suggests that customers are committing to Planet Labs for the long term, enhancing the business’s predictability. 
2. Increasing free cash flow margin juices financials
Free cash flow isn’t a prominently featured metric in company financials and earnings releases, but we think it’s telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, Planet Labs’s margin expanded by 54.5 percentage points over the last five years. Planet Labs’s free cash flow margin for the trailing 12 months was 6.5%.
3. New investments bear fruit as ROIC jumps
We like to invest in businesses with high returns, but the trend in a company’s ROIC can also be an early indicator of future business quality.
Over the last few years, Planet Labs’s ROIC has increased. This is a good sign, but we recognize its lack of profitable growth during the COVID era was the primary reason for the change.
Final judgment
These are just a few reasons why we think Planet Labs is an elite business services company. With the recent decline, the stock trades at 288× forward EV-to-EBITDA (or $12.94 per share). Is now the right time to buy? See for yourself in our full research report, it’s free.
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