Workflow
Could Innodata Become the Next Palantir?
INODInnodata(INOD) The Motley Fool·2024-07-29 11:13

Palantir Overview - Palantir went public via a direct listing on Sept 30, 2020, starting at 10andcurrentlytradingatabout10 and currently trading at about 29 [1] - The company has shown robust growth, rising profits, and rapid expansion of its domestic commercial business, reducing dependence on government contracts [1] - Revenue grew at a CAGR of 32% from 2019 to 2023, with analysts forecasting a CAGR of 20% from 2023 to 2026 [10] - Palantir turned profitable on a GAAP basis in 2023, with net income expected to rise at a CAGR of 46% over the next three years [10] Innodata Overview - Innodata is a 500millioncompanyexpandingfasterthanPalantir,withsharestradingat4timesthisyear′ssales[4][8]−Thecompanyprovidesbusinessprocess,technology,andconsultingservices,mainlyservinglargeorganizationsacrossvarioussectors[14]−Innodatastarted2024withmasterserviceagreementswithfiveofthe"MagnificentSeven"companies,anticipatingrevenueboostsfromthreeofthemthisyear[5]FinancialPerformanceandGrowth−Innodata′srevenuegrewataCAGRof12500 million company expanding faster than Palantir, with shares trading at 4 times this year's sales [4][8] - The company provides business process, technology, and consulting services, mainly serving large organizations across various sectors [14] - Innodata started 2024 with master service agreements with five of the "Magnificent Seven" companies, anticipating revenue boosts from three of them this year [5] Financial Performance and Growth - Innodata's revenue grew at a CAGR of 12% from 2019 to 2023, with expectations of at least 40% organic revenue growth in 2024 [11] - Analysts expect Innodata's revenue to increase at a CAGR of 33% from 2023 to 2026, driven by new generative AI services [11] - The company squeezed out positive adjusted EBITDA of 5 million in 2023, with analysts expecting it to rise at a CAGR of 64% to 22millionby2026[3]MarketPotentialandValuation−IfInnodatameetsWallStreet′stargetofgenerating22 million by 2026 [3] Market Potential and Valuation - If Innodata meets Wall Street's target of generating 205 million in revenue in 2026 and trades at 10 times sales, it would be worth more than 2billion[6]−Palantir′sstockisconsideredexpensiveat87timesforwardearningsand24timesthisyear′ssales,withamarketcapof2 billion [6] - Palantir's stock is considered expensive at 87 times forward earnings and 24 times this year's sales, with a market cap of 64 billion [4] - Innodata's shares soared 1,350% over the past five years, reflecting its transformation into a growth stock due to the generative AI market expansion [8] Competitive Landscape - Innodata faces competition from IT services giants like Accenture and digital transformation specialists like Globant [12] - The company's new Magnificent Seven customers could reduce generative AI spending if the market cools off [12] - Despite competition, Innodata's generative AI business expansion offers significant upside potential [9]