Palantir (NYSE: PLTR), the data mining company that generates most of its revenue from U.S. government contracts, recently released its first quarterly report as a state-owned company. Let’s take a look at the five most important numbers in this report and see if they suggest the stock is worth buying.

1.52% revenue growth

Palantir’s total revenue grew 52% year-over-year to $ 289.4 million in the third quarter of 2020, beating estimates by $ 10.1 million.

It closed three major contracts during the quarter: a $ 91 million contract with the U.S. military, a $ 36 million contract with the National Institutes of Health, and a $ 300 million contract renewal with a client. anonymous aerospace.

2.56% of Gotham’s revenue

Palantir operates two main platforms: Gotham for government customers and Foundry for corporate customers. Both services collect user information from disparate sources to create actionable data.

Gotham accounted for 56% of Palantir’s revenue in the quarter, up from 51% a year earlier, while the remaining 44% came from Foundry.

Bears often cite Palantir’s growing reliance on government clients as a weakness, for two reasons. First, Palantir already serves most U.S. government agencies, including the Department of Defense, FBI, CIA, Centers for Disease Control and Prevention, and Immigration and Customs Enforcement (ICE). These contracts will generate stable income for Palantir, but ultimately it is a limited market.

Second, several of these contracts – in particular its ICE contract for tracking undocumented immigrants – are very controversial. Palantir has already faced internal uprisings over its ICE contract, demands from employees of Amazon (NASDAQ: AMZN) Web Services to stop hosting Palantir’s services on its cloud platform, and protests from activist groups.

Ideally, Palantir should expand Foundry to reduce its dependence on Gotham. Foundry’s revenue rose 35% year-over-year to $ 126.8 million in the quarter as it pulled a “large consumer goods company” from an unnamed rival, but it still couldn’t keep pace with Gotham, which grew its revenue by 68% year over year. to $ 162.6 million. The aforementioned U.S. military contract, which will boost its artificial intelligence (AI) and machine learning capabilities over the next two years, significantly increased Gotham’s revenue.

Going forward, investors should see if Foundry’s growth accelerates and if its weight on Palantir’s revenue increases. Otherwise, Palantir’s dependence on the US government will remain a double-edged sword.

3.38% growth in average turnover per customer

Palantir ended the quarter with 132 customers, up from 125 at the end of the second quarter. That number may seem small, but each of these big customers generates millions of dollars in revenue.

In the first nine months of 2020, its average revenue per customer grew 38% year-over-year to $ 5.8 million. Its average revenue for its top 20 customers also increased 36% to $ 23.6 million.

Palantir generated 61% of its revenue from these top 20 customers in those nine months, up from 68% a year earlier. This diversification is encouraging, but the company will continue to rely heavily on these major customers – who are probably mostly Gotham users – for the foreseeable future.

4. A net loss of $ 853 million

Palantir’s top line growth looks solid, but its net loss widened year over year from $ 139.9 million to $ 853.3 million. That translated into a loss of $ 0.94 per share, which far exceeded analysts’ expectations of $ 0.77.

Most of that loss was attributed to $ 847 million in stock-based compensation (SBC) expenses related to its direct listing in September. But excluding those messy SBC expenses, its gross margin actually increased year over year from 71% to 79% in the third quarter.

On a non-GAAP basis, which excludes its SBC and direct listing fees, Palantir has a positive operating margin of 25%, compared to a negative operating margin of 48% a year ago. It also increased its full-year non-GAAP operating income forecast from $ 116 million to $ 126 million to $ 130 to $ 136 million.

Based on these improvements, Palantir’s GAAP losses could also be reduced after overtaking the SBC and the direct listing costs of its public debut. By then, its $ 1.8 billion in cash and cash equivalents – which fell from $ 1.1 billion at the end of 2019 – should cushion it against future losses.

5. Less than 22 times next year’s sales

Palantir currently expects its revenue to grow 44% for the full year, compared to its previous forecast of 42% growth. It also expects its revenue to grow by more than 30% in fiscal 2021.

Based on those estimates, Palantir shares are trading at 28 times this year’s sales and less than 22 times next year. These valuations may seem high, but they are actually well below the price / sale ratios from another recent high growth technology IPOs.

The key to take away

Like I have previously mentioned, lingering concerns over Palantir’s controversial government contracts, lack of profits, and insider selling likely kept its stock from taking off after its public debut. However, Palantir apparently rocked those worries over the past month as its stock price jumped more than 60%.

Palantir will remain a controversial stock, but investors shouldn’t ignore its robust revenue growth, expanding margins, and reasonable valuation. This could also be a great stock to own during a recession, since its government contracts are well insulated from macroeconomic headwinds.