Is Planet Labs PBC (PL) Undervalued As EPS, Free Cash Flow, And Backlog Improve?

Planet Labs PBC (PL) is back in focus after recent updates around its earnings per share, free cash flow margin, and a sizeable backlog suggested a company working to strengthen its financial position.

See our latest analysis for Planet Labs PBC.

At a share price of $20.47, Planet Labs PBC has given investors a very large 3 year total shareholder return of 493.33%, even as the 90 day share price return is down 42.24%. Recent weakness suggests momentum has cooled after a strong run linked to improving earnings per share, free cash flow, and backlog headlines.

If Planet Labs PBC has caught your eye, it can also be useful to see what else is moving in related areas of the market, including 55 AI infrastructure stocks.

Bulls point to Planet Labs PBC’s large backlog and improving free cash flow margin, while bears focus on the recent 42% pullback and ongoing losses. Which case does the current valuation appear to support next?

Most Popular Narrative: 49% Undervalued

With Planet Labs PBC trading at $20.47 against a most followed fair value estimate of $40, the narrative frames today’s pullback as a large discount built on ambitious growth and margin assumptions.

The analysts have a consensus price target of $40.0 for Planet Labs PBC based on their expectations of its future earnings growth, profit margins and other risk factors.

However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $53.0, and the most bearish reporting a price target of just $22.0.

Read the complete narrative.

Want to see what is behind that fair value gap for Planet Labs PBC? The narrative leans on rapid revenue compounding, a sharp margin swing and a rich future earnings multiple. The mix of growth, dilution and discount rate assumptions is where the real story sits.

Result: Fair Value of $40 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, the Planet Labs PBC narrative could be challenged if planned satellite deployments strain cash flows or if large defense and intelligence contracts prove less predictable than hoped.

Find out about the key risks to this Planet Labs PBC narrative.

Another View on Planet Labs PBC Valuation

While the analyst fair value narrative suggests Planet Labs PBC looks 49% undervalued at $20.47, the price to sales ratio paints a very different picture. The current P/S of 21.7x sits far above the fair ratio of 6.7x, the peer average of 1.7x, and the US Professional Services industry at 0.9x. This points to considerable valuation risk if expectations reset.

Given the size of the gap between today’s P/S and where peers and the fair ratio sit, it may be worth considering how much future growth is already reflected in the current Planet Labs PBC share price, and whether you would prefer a wider margin of safety before taking a view on this stock, based on your own assumptions and risk tolerance.

See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

With Planet Labs PBC stirring both optimism and concern, it makes sense to move quickly, review the underlying figures yourself, and decide how the balance of risks and potential rewards sits for you by weighing the 1 key reward and 4 important warning signs.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.