Can Planet Labs’ Recent 76% Rally Be Justified After Q1 Results?

Trying to figure out what to do with Planet Labs PBC stock? You are definitely not alone. This satellite imaging company has drawn attention from investors who see potential in its technology-powered future, especially after a period of volatile trading. Over the last quarter, PL shares have surged by more than 76%, reflecting renewed optimism in the market's perception of its growth trajectory. This jump represents a significant turnaround from recent months, when the stock saw some short-term dips, and it hints at changing investor confidence and possibly shifting risk expectations.

However, short-term price swings are just part of the story. Looking at Planet Labs' fundamentals, revenue continues to climb, and its price now sits at a modest discount of about 10% to the average analyst target and an even greater 15.4% discount using a DCF-based intrinsic value estimate. On the other hand, when it comes to traditional valuation metrics, the company earns a score of 1 out of 6, indicating that only one valuation check suggests the stock is undervalued at current levels. This kind of mixed result raises a bigger question for any investor: how do you know if the current price really represents a good value?

Next, we will look at some of the most common valuation methods and break down what they tell us about Planet Labs today. Stay tuned, because at the end of the article, we will introduce a smarter way to look at valuation that could change how you view not just this company, but almost any stock in the market.

Planet Labs PBC delivered 153.1% returns over the last year. See how this stacks up to the rest of the Professional Services industry.

Approach 1: Planet Labs PBC Cash Flows

A Discounted Cash Flow (DCF) model estimates a company’s value by predicting future cash flows and discounting them back to today’s dollars. This gives investors a sense of what the business is truly worth now based on expected long-term performance.

For Planet Labs PBC, the most recent Free Cash Flow stands at a negative $35.27 million, indicating the company is still investing heavily in its growth phase. Looking ahead, analysts expect a dramatic turnaround and project Free Cash Flow to grow from negative territory to about $145.1 million in ten years. These estimates are based on a 2 Stage Free Cash Flow to Equity model, which outlines a path from negative outflows to steadily increasing positive cash generation through 2035.

According to this outlook, the DCF model calculates an intrinsic value of $7.66 per share for Planet Labs. With the current market price sitting roughly 15.4% below this intrinsic value, the stock appears to be 15.4% undervalued as determined by the DCF approach. This may indicate the market is underestimating the company’s future cash-generating potential.

Result: UNDERVALUED

Our DCF analysis suggests Planet Labs PBC is undervalued by 15.4%. Track this in your watchlist or portfolio, or discover more undervalued stocks based on DCF analysis.

Approach 2: Planet Labs PBC Price vs Sales

For many companies that are not yet profitable, the Price-to-Sales (P/S) ratio is a commonly used valuation metric because it allows investors to assess how much they are paying for every dollar of revenue, regardless of earnings. This makes the P/S ratio particularly relevant for Planet Labs PBC, given its focus on growth and investment over current profitability. Generally, a higher growth outlook or a stronger market position can justify a higher P/S ratio, while greater risks or lower anticipated growth may lead to a P/S multiple closer to the industry average.

Planet Labs currently trades at a P/S ratio of 7.86x, which is significantly higher than the Professional Services industry average of 1.24x and the peer group average of 1.88x. Investors may be willing to pay this premium in anticipation of future sales expansion. However, proprietary modeling gives Planet Labs a Fair Ratio of 3.20x, reflecting a balanced assessment of its revenue growth potential, profit margins, market capitalization, and risk profile.

Comparing the Fair Ratio (3.20x) to the actual P/S multiple (7.86x) shows that the stock is trading well above what fundamentals would justify. This suggests the market is pricing in an optimistic outlook that might not yet be supported by Planet Labs’ business performance.

Result: OVERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Planet Labs PBC Narrative

While traditional valuation models analyze the numbers, Narratives offer a more meaningful approach by connecting a company’s unique story and business potential to its long-term financial forecasts and resulting fair value. In simple terms, a Narrative is your perspective on a company’s future, combining what you believe about its growth, margins, and direction into one clear forecast.

On the Simply Wall St platform, Narratives make it easy to build, share, and compare different investment stories with millions of other investors. Each Narrative connects your view of a company’s prospects to concrete financial models, generating a fair value that you can then compare to the current market price to help decide if a stock is worth buying or selling. In addition, every Narrative updates automatically as fresh news, major contracts, or new earnings are announced. This means your valuation can react quickly to what really matters.

For example, regarding Planet Labs PBC, some investors believe the company’s satellite network could justify a fair value as high as $11.31 per share. Others take a more cautious view, estimating the fair value at $7.16.

Do you think there's more to the story for Planet Labs PBC? Create your own Narrative to let the Community know!

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.

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