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tenter stock is now down 15% off the
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highs in the last month if you remember
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about a month and a half ago I did a
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video answering if you should buy paler
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stock and I said no that the stock was
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too expensive at that point in time but
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what about with this 15% discount is
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paler stock a buy now on this big dip
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that's the question I'm going to answer
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in this video by looking at the
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company's recent performance looking at
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the revenue growth over Rec years
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looking at how its cash flow has
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expanded the impressive return on its
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invested capital and I'll look ahead at
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the prospects at the excellent prospects
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paler has over the next 5 Years bring it
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all together with the valuation
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measuring the new forward price to
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earnings ratio and the new discounted
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cash flow valuation I've calculated for
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palente here to answer the question if I
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think it's a buy on this dip let's get
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into it I want to thank the m full for
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sponsoring this video visit full.com
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parev for the 10 best stocks to buy now
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so like I mentioned the stock is down
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15% off its high that's a significant
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loss for many investors that had been
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coming into paler stock because of all
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the momentum all of the hype share
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prices were reaching record highs and
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now it bit a it's hit a bit of a wall
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here in the last month now like I
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highlighted I did a video about a month
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ago I last updated this stock on
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December 11th 2024 and I told investors
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that I thought the stock was a hold that
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I thought it was going to perform in
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line with the market and what I mean by
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that is if the market increased I felt
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paler stock would increase along with
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the market but if the market fell I felt
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paler stock would fall in line with the
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market I didn't feel at those valuations
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on December 11th that paler stock would
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outperform the market that was my
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conclusion in the video I did on
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December 11th so I'm going to update
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that recommendation here and let you
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know if I still feel the same or if this
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15% discount changes my opinion on the
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prospects of paler stock as an
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investment so paler has done an
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excellent job in increasing Revenue
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especially in the most recent four to
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six core quarters it's really
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accelerated growth and the thing that's
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fueling palente here's growth is the
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increase in the commercial segment the
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business segment paler had always done
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great with government institutions with
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Deep Pockets but it had more difficulty
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with Enterprises because its services
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are so good they're unaffordable for
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most businesses and so now with this new
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program paler has implemented it's
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gaining access to broader set of
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businesses because paler is showing them
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what they're capable of achieving and
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that's convincing more businesses to
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expand their budgets to incorporate
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paler as one of the services that
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they're buying now in the last month and
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a half or three months that paler stock
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had soared to those exceptional
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highs that was mostly on the back of
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enthusiasm for the market enthusiasm for
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AI stocks enthusiasm following the
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election results in November palente
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here had hadn't demonstrated some big
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thing that justified that huge price
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increase that's why you notice the price
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increased but the valuation also
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increased often times when a company
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improves operations like they have a big
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cash flow burst or a big increase in
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earnings the market price will increase
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but the valuation will not increase and
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if you're kind of scratching your head
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and asking what's the difference between
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market price and valuation well I'm glad
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you
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asked see the valuation is measured on
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some type of metric something that
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you're getting in return for the price
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that you're paying so in the case of
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paler Technologies I was measuring based
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on the forward price to earnings ratio
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and this is what I was alluding to when
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I told investors that paler was too
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expensive when I looked back 3 years at
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the forward PE ratio
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it was trading at the highest it had
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ever traded for close to 200 the average
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stock in the S&P 500 trades at a forward
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PE of 20 to 25 now paler is not the
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average stock it's a premium business
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with excellent prospects right I showed
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you the revenue growth look at the
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improvements in operating profit margin
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company has become profitable on the
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bottom line look at the improvements in
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cash flow from operations to sales at
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37.6% growing from - 25% from 2021 look
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at the improvements in return on
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invested Capital all of these are
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critical metrics that palente here has
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demonstrated phenomenal improvements on
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it is a premium business that has earned
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the premium price right just like when
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you go to buy a car you have your Honda
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Accords and Toyota Camry's those are
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basic cars basic models right that earn
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a basic price but then when you go and
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you look at the Ferrari
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the Aston Martins the Mercedes the BMWs
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those are premium cars that deserve
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premium prices you're willing to pay a
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higher price same in the case of paler
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versus the average stock paler is not an
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average stock it's a premium stock it's
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like the Aston Martins and Ferraris and
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Mercedes of the stock market it's one of
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the best in class and so it deserves a
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premium price but my argument a month
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ago was that
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that premium was too much at close to
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150 forward PE I felt that was too much
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too high of a premium to pay for paler
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stock now I did have paler stock rated
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as a buy early in 2024 for about the
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first half of 2024 I had it rated as a
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buy when it was trading at a forward PE
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of around 50 at around that price
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between 50 and maybe even as high as 60
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I felt that Palante your stock because
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it's such a premium business you're
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paying about double or three times the
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average price of the stock I felt that
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was worth it that was a premium price to
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pay but that's just one way to look at
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valuation right another way I look at
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valuation is by doing a discounted cash
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flow model and I had done a a discounted
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cash flow model on paler
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stock before in December around November
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October and I utilized that DCF value
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model for my stock price evaluation of
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paler to to to determine if it was an
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excellent stock to buy and I updated
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this today I did a new valuation model
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on January 7th and even my new model
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where I made some adjustments and I
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lowered the company's risk profile I
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made an adjustment to lower the risk
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because the stock price movement as
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measured by the beta I felt wasn't a
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reflection of the business the company
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generates very strong cash flow it's got
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$4.5 billion dollar in cash and zero
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debt it's not a very risky business in
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terms of the balance sheet in terms of
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how much cash flow it generates in terms
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of
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profitability but the beta the current
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beta is at
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2.7 and so I adjusted that lower to 1.5
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to incorporate that it's not such a
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risky business and even with that
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decrease in adjustment I still have an
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intrinsic value per share of around $20
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for palente tier when the market price
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even after this dip is at
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70 so whether I look at the forward PE
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or I look at the DCF it still suggests
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that Palante tier is trading at a super
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premium
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price and yes I agree it deserves a
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premium price it's an excellent business
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and look at the free cash flow
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expectations from Wall Street they
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expect its free cash flow to grow from
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around 100 million in 2024
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all the way up to 2.83 billion by
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2028 so uh roughly tripling of its free
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cash flow expected over these next few
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years and I Incorporated that into my
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valuation model even after incorporating
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that huge increase in cash flow it still
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gives me an intrinsic value per share
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significantly below the current market
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price so to update my recommendation do
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I think paler stock is now a Buy on this
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dip or do I still think it's a hold do I
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still think that there's room for it to
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go lower before investors should buy I I
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do still think it's a hold so I don't
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think this dip is enough of a dip to
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justify upgrading my price for paler
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stock or in other words upgrading my
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rating for paler stock even though I
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think it's an excellent business I think
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it's performed phenomenally well and I
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would be willing to pay a premium price
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for paler stock I just feel like the
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existing premium is way above the
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premium that I would already be willing
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to pay so even after accounting for a
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premium boost because of the premium
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business it still suggests that there
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needs to be further room lower before I
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can upgrade this to a buy hey everyone
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I'm excited to announce that my book is
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finally available for sale I've been
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working on it for more than a year now
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so I'm really excited to finally share
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this with you now now it goes through my
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framework for evaluating stocks some of
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you often ask why I like this stock or
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why I like the other stock and this
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framework provides you the things that I
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look at when I'm evaluating stocks I've
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added the link in the description below
