Where Will Palantir Stock Be in 5 Years?

Making jections where a stock will be in five years isn't easy, but it's required in

The foundational idea of in stocks is identifying a stock that is currently undervalued and will become more valuable in the future

While some traders may set a price target for a month or a year away, long-term investors prefer to focus on a three to five-year time frame, as it allows the to succeed and lets the market perly value the stock

One of the most AI stocks in the market is Palantir nologies (PLTR 1

Palantir dered excellent returns over the past few years, and investors want to know if it's too late to get in

Let's take a look at Palantir's five-year outlook and see if it's a smart buy today

The answer may surprise you

Image source: Palantir

Palantir is showing excellent growth in three of its four segments Palantir rose to the top of the AI world due to its rapid growth and experience in the space

Government-sourced revenue remains the majority of Palantir's total, but the commercial side is rapidly gaining

The growth rate was the same in the U

And internationally, indicating that this segment is experiencing healthy growth and adoption worldwide

However, commercial adoption outside the U

This highlights a couple of key facts

Commercial revenue growth needs to continue at its rapid pace for the stock to keep dering huge growth

Second, if international commercial revenue starts to accelerate, Palantir's overall growth could really pick up speed

The biggest region to watch for Palantir's international growth is Europe, which significantly lagged behind the U

However, that could change in the coming years and vide Palantir a second growth catalyst

However, investors shouldn't read too much into that, as management has a consistent track record of beating internal expectations

That's still a slight deaccelerating trend, but it could be reversed by increasing international commerce growth

But will that be enough for the stock to der strong returns over the next five years

The stock has incredibly high expectations baked into it The biggest challenge Palantir's stock faces over the next few years isn't European growth or government revenue; it's the unbelievably high expectations already baked into the stock price

Palantir's stock currently trades for 106 times sales, a level that's practically unheard of for a company growing as "slowly" as Palantir is

PLTR PS Ratio data by YCharts I say "slowly" because most companies that achieve a valuation of 100 times sales or greater are at least doubling, if not tripling, their revenue year over year

Palantir isn't even close to that, which raises some red flags

Most software companies trade between 10 and 20 times their sales, with the best-performing companies reaching a multiple of 30 times sales

That's nearly all of the five-year period we're examining Palantir's stock for

I believe this indicates how overvalued Palantir's stock is, and I expect the stock to remain relatively flat over the next five years, as nearly all of the growth has already been factored into the stock's price

As a result, I think investors are better off finding other AI stocks that don't have the same expectations built into them

Keithen Drury has no position in any of the stocks mentioned

The Motley Fool has positions in and recommends Palantir nologies

The Motley Fool has a disclosure policy.