Over the last six months, Planet Labs’s shares have sunk to $22.32, producing a disappointing 13.7% loss - a stark contrast to the S&P 500’s 7.9% gain. This may have investors wondering how to approach the situation.
Given the weaker price action, is now the time to buy PL? Find out in our full research report, it’s free.
Why Are We Positive on Planet Labs?
Pioneering the concept of "agile aerospace" with hundreds of small but powerful satellites, Planet Labs (NYSE: PL) operates the world's largest fleet of Earth observation satellites, capturing daily images of our planet to provide insights on deforestation, agriculture, and climate change.
1. Surging Backlog Locks In Future Sales
Investors interested in Data & Business Process Services companies should track backlog in addition to reported revenue. This metric shows the value of outstanding orders that have not yet been executed or delivered, giving visibility into Planet Labs’s future revenue streams.
Planet Labs’s backlog punched in at $906.1 million in the latest quarter, and over the last two years, its year-on-year growth averaged 143%. This performance was fantastic and shows the company has a robust sales pipeline because it is accumulating more orders than it can fulfill. Its growth also suggests that customers are committing to Planet Labs for the long term, enhancing the business’s predictability. 
2. EPS Improving Significantly
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Although Planet Labs’s full-year earnings are still negative, it reduced its losses and improved its EPS by 50.5% annually over the last four years. The next few quarters will be critical for assessing its long-term profitability. An inflection point could be coming soon.
3. Increasing Free Cash Flow Margin Juices Financials
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, Planet Labs’s margin expanded by 59.8 percentage points over the last five years. Planet Labs’s free cash flow margin for the trailing 12 months was 13.9%.
Final Judgment
These are just a few reasons why Planet Labs ranks near the top of our list. After the recent drawdown, the stock trades at 368.3× forward EV-to-EBITDA (or $22.32 per share). Is now a good time to initiate a position? See for yourself in our in-depth research report, it’s free.
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