it's going to be big.., page-12

Pandev.

Some interesting comments you make there and in reply

a) Yes, I have heard of Atlassin. However, would my unawareness inhibit my ability to value a company such as xero?

b) Probably a little unfair to generalise a whole exchange as being clueless with regards to valuing software companies.

Let's for arguments sake assume ASX investors have no clue how to value 'enterprise software companies' and being an ASX investor I would have to put myself in this category. Probably the best valuation approach I could take would be to piggyback off the valuations of our friends in the U.S (the mecca of software startups) by taking appropriate ratios of similar companies and applying them against XRO. Let's use Workday, salesforce and netsuite as a sample (I'm using these companies as Xero compared itself to them in its investor presentation).

As Xero has no earning as yet, Price/Sales is probably the best alternative:
Salesforce P/S = 8.83 (Prior year rev growth = 31%)
Workday P/S = 28.56 (prior year rev growth = 72%, which disagrees with your 100%/half... i checked your source google finance but was still unable to get to your figure??)
Netsuite P/S = 21.80 (Prior year rev growth = 27%)
Xero P/S = 83.23 (prior year rec growth = 102%
Source: Bloomberg
Salesforce and netsuite are both expected to turn a profit this year. Workday is probably the best comparison in terms of where it's at in it's life cycle and while XRO's rev growth is about 30% higher it trades on a P/S multiple almost 3X greater than Workday.

In addition to the above analysis it is worth noting that there are being questions raised over whether the cloud computing industry in general is in bubble territory, and XRO is the most expensive of an arguably expensive lot.

I tried to find some analyst research on XRO and could only come up with one report from a boutique broker. Xero has 3 listed on its website but all boutiques, no major IB or research houses. This is in itself a concern as it probably means the big end of town (or so called smart money) are not moving this stock, which leaves boutique funds and individuals. Regardless the one report I did find valued it at around NZ$16 (forsyth Barr).

Here another interest site I found which crunched some numbers of comparable companies http://www.valuecruncher.com/companies/9188

But, then again I'm just an ASX investor so DYOR.
Gralynchett