Palantir: The Stock Is Richly Valued With a Forward P/S Multiple of Over 40x, but Is the Growth Story Still Worth Buying Into?

Palantir Technologies (NASDAQ: PLTR) is a stock that has greatly divided investors over the years. The biggest reason for this is its valuation, as the stock trades at a forward price-to-sales (P/S) multiple of around 41 times 2026 analyst estimates and a forward price-to-earnings ratio (P/E) of nearly 90 times. Despite those high valuation metrics, though, the stock looks like it could be a top stock to own for the long term.

Top growth stocks rarely trade cheaply, and Palantir has proven to have one of the best growth stories for a large-cap stock not involved in the artificial intelligence (AI) infrastructure boom. The company has seen its revenue growth accelerate for 11 consecutive quarters, with growth of 85% in the first quarter. Meanwhile, its growth is being led by a combination of new customer additions and rapid expansion from existing customers.

A unique offering with a long runway of growth

What makes Palantir special is its unique solution, which is becoming an integral part of the AI ecosystem. Instead of trying to build the next great AI model, Palantir turned to its roots in data gathering and analytics to develop an application layer that makes AI more useful for enterprises in the real world.

Its solution gathers information from a variety of disparate sources and then organizes it into an ontology, where it links data to physical assets and real-world processes. This gives AI models a single source of truth grounded in real objects and tasks, greatly reducing AI hallucinations and helping organizations apply AI to solve the actual problems they face.

Being AI-model agnostic is a big plus, as it doesn't tie its customers to one company's models. This gives its customers flexibility that reduces risks and allows it to sell its Artificial Intelligence Platform (AIP) solution across a wide array of industries. The use cases for its solution are enormous, as is its growth runway.

Image source: The Motley Fool.

Palantir's solution has been a hit with its customers, and its net revenue retention (NRR), which measures revenue growth from existing customers who have been with the company for a year or longer, is a testament to how important its solution becomes once it gets a foothold in an organization. Over the past 12 months, Palantir's NRR is a whopping 150%, which essentially means customers who have been with Palantir for a year or more are increasing their spending with the company at a 50% annual clip.

That's remarkable. At the same time, Palantir's AI bootcamps, where it helps potential clients solve an actual issue they are facing within seven days, have become a strong selling point that greatly speeds up sales cycles.

While the stock is not cheap, this all provides the foundation for Palantir potentially becoming one of the largest companies in the world over the next decade, making it a top AI stock to own.

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.