Investors looking for a methodical way to find fast-growing companies frequently use proven methods. One framework is described in Louis Navellier's The Little Book That Makes You Rich, which lists eight basic rules for picking excellent growth stocks. This approach focuses on a mix of improving financial results, favorable analyst opinion, and good operational efficiency. A recent filter using these strict rules has identified Palantir Technologies Inc-A (NASDAQ:PLTR) as a possible candidate for more detailed review.
Fit with the "Little Book" Growth Rules
The center of Navellier's approach requires sorting for companies with forceful, many-sided momentum. Palantir's latest financial reports indicate a notable fit with many of these important rules, as shown by the precise data from the filter.
- Positive Earnings Revisions & Surprises: A key part of the method is increasing analyst forecasts. Palantir displays a large upward revision, with the average EPS estimate for the coming quarter increased by 38.9% over the past three months. Also, the company has exceeded EPS estimates in three of the past four quarters, with an average surprise of 10.5%. Repeated positive surprises can lead analysts to raise future estimates, creating a favorable pattern for the stock price.
- Strong and Improving Growth: The approach requires good expansion in revenue and profit. Palantir's growth numbers are outstanding:
- Revenue increased 56.2% year-over-year (TTM) and 70.0% quarter-over-quarter.
- EPS increased 82.9% year-over-year (TTM) and 78.6% quarter-over-quarter.
- Importantly, the current quarterly EPS growth (78.6%) is higher than the growth rate from the same quarter a year ago (75.0%), showing positive earnings momentum, another key rule.
- Increasing Profitability and Good Cash Creation: Rising sales must lead to better efficiency. Palantir's operating margin has widened by a notable 191.7% over the last year, indicating the company is scaling with profit. Also, its free cash flow increased by 84.1%, giving financial room to support operations and growth from within, a marker of a sound, lasting business model.
- High Return on Equity: The last rule looks for effective use of shareholder money. Palantir's Return on Equity (ROE) of 22.0% is much higher than the filter's 10% minimum, showing it creates significant profit from the equity put into the business.
Basic Financial Soundness and Price Context
A different basic analysis report on ChartMill gives Palantir a total score of 7 out of 10. The report notes two especially solid parts: Profitability and Financial Soundness. The company's margins (Operating Margin of 31.6%, Profit Margin of 36.3%) are placed in the best group of its software industry competitors. Its balance sheet is also sound, having no debt and high liquidity measures, which leads to a very good solvency score.
The main point of care, as seen in the report's Valuation score of 2, is the stock's high price. With a P/E ratio much above the market norm, a large part of Palantir's very high growth story seems to be already included in the market price. This indicates that while the company shows the operational features wanted by growth investors, the point of purchase and price judgment are still vital factors.
You can see the detailed basic breakdown in the full Palantir Technologies (PLTR) Fundamental Analysis Report.
Conclusion
For investors using a growth-oriented method like the one in The Little Book That Makes You Rich, Palantir Technologies offers a notable example. The company now shows a strong combination of the strategy's wanted features: climbing revenue and earnings, greatly widening profitability, good cash flow, and positive analyst revisions. These elements point to a business performing well and possibly building speed in its market.
However, the investment idea is split. The operational strength is evident, but it is paired with a high price that requires ongoing very fast growth to support. Investors need to balance the company's unusual basic momentum against the high cost they must pay for it.
This examination uses a particular filtering strategy. To see other companies currently passing the "Little Book" filter and do your own study, you can use the pre-set screener here: Louis Navellier's "Little Book" Growth Screen.
Disclaimer: This article is for information and learning only and is not a suggestion to buy, sell, or keep any security. The information shown should not be the only ground for an investment choice. Investors are strongly told to do their own separate research, think about their personal money situation, and talk with a qualified financial advisor before making any investment.
