Reverse Engineering Expectations of the Q2-FY20 Result and Beyond, page-5

Hi @jlo2012,

Good post, but I disagree with your statement that the multiple should be applied to booked revenue and not ARR.

I am well aware that TTM is referring to trailing twelve months, yet it can still be applied for ARR (churn is non-existent for LVT and ARR will become booked revenue, albeit with a lag).

My predictions above are for the share price in July 2020, at which point TTM will refer to the ARR at the end of FY20.

Multiples for SaaS stocks are always applied on the ARR figure, not booked revenue. This is because for SaaS companies, booked revenue is not a good indicator of future cash flows, which the multiple method is attempting to approximate. For SaaS companies, valuations are more closely approximated by ARR rather than booked revenue or profits.

Cheers,

T.E.P.