Palantir Technologies (PLTR -1.42%) just had a year for the record books. The artificial intelligence (AI) and data mining specialist soared 340% in 2024, according to data provided by S&P Global Market Intelligence. That made Palantir the best-performing stock in the S&P 500 and the third-best performer in the Nasdaq-100.

There's little doubt that the excitement regarding the potential for AI helped fuel the stock's epic run, but a look under the hood shows that robust performance, a novel approach, and a number of strategic moves by management deserved a healthy dose of the credit as well.

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Show me the money

The biggest contributor to Palantir's success last year was its financial results. The company delivered four consecutive quarters of accelerating revenue growth and continued the profitability it had announced was a priority the year before.

Make no mistake, it was surging demand for Palantir's Artificial Intelligence Platform (AIP) that fueled the results. This tool took AI from the drawing board to practical application, helping businesses make data-driven decisions by tapping into company-specific information.

In a stroke of sheer genius, management developed boot camp sessions that paired customers with Palantir developers to take the mystery out of AI and create solutions they could use -- in as little as five days. Its recent results help highlight the success of this strategy. In the third quarter, revenue grew 30% year over year to $726 million, resulting in earnings per share (EPS) of $0.06, which surged 100%. But that tells only part of the story.

The company's U.S. commercial revenue, which includes AIP, grew 54% year over year and 13% sequentially, while the segments customer count soared 77%. This helped push its remaining deal value (backlog) up 73%, which suggests the company's growth spurt will continue.

All the right moves

Palantir's consistently strong results helped set the stage for what was to be a blockbuster 2024. By the third quarter, the company has achieved its fourth consecutive quarter of profitability under generally accepted accounting principles (GAAP). This checked the final box that would ultimately secure Palantir's admission to the S&P 500 in September.

In mid-November, management made a calculated move, shifting Palantir's stock from the New York Stock Exchange to the Nasdaq, which ushered in its inclusion in the Nasdaq-100 when the index rebalanced in December.

While these moves might seem much ado about nothing, Palantir's admission to these two benchmark indexes opened the stock up to much greater ownership among institutional investors, particularly those investing in exchange-traded funds that track the indexes in question.

The opportunity is vast, but...

It's worth noting that the surge in Palantir's stock price has seen a commensurate increase in its valuation. The stock currently trades for 158 times forward earnings and 41 times forward sales (as of this writing). That said, the most commonly used valuation metrics struggle to capture the true value of high-growth stocks.

Applying the more appropriate forward price/earnings-to-growth (PEG) ratio -- which takes into account Palantir's accelerating growth rate -- returns a multiple of 0.37, with any number less than 1 being the standard for an undervalued stock.

For investors with the appropriate long-term outlook and willing to withstand the volatility that is sure to continue, Palantir is worth a look despite its seemingly frothy valuation.