Palantir Technologies’s stock price has taken a beating over the past six months, shedding 20.5% of its value and falling to $131.82 per share. This might have investors contemplating their next move.
Following the drawdown, is now a good time to buy PLTR? Find out in our full research report, it’s free.
Why Are We Positive on PLTR?
Named after the all-seeing stones in "Lord of the Rings," Palantir Technologies (NASDAQ: PLTR) develops software platforms that help government agencies and enterprises integrate, analyze, and operationalize their data for decision-making.
1. Billings Surge, Boosting Cash On Hand
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
Palantir Technologies’s billings punched in at $1.74 billion in Q1, and over the last four quarters, its year-on-year growth averaged 67.6%. This performance was fantastic, indicating robust customer demand. The high level of cash collected from customers also enhances liquidity and provides a solid foundation for future investments and growth. 
2. Customer Acquisition Costs Are Recovered in Record Time
The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.
Palantir Technologies is extremely efficient at acquiring new customers, and its CAC payback period checked in at 5.3 months this quarter. The company’s rapid recovery of its customer acquisition costs indicates it has a highly differentiated product offering and a strong brand reputation. These dynamics give Palantir Technologies more resources to pursue new product initiatives while maintaining the flexibility to increase its sales and marketing investments.
3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Palantir Technologies has shown terrific cash profitability, driven by its lucrative business model and cost-effective customer acquisition strategy that enable it to stay ahead of the competition through investments in new products rather than sales and marketing. The company’s free cash flow margin was among the best in the software sector, averaging an eye-popping 54.1% over the last year.
Final Judgment
These are just a few reasons why Palantir Technologies is one of the best software companies out there. After the recent drawdown, the stock trades at 40.5× forward price-to-sales (or $131.82 per share). Is now a good time to buy? See for yourself in our full research report, it’s free.
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