Velpic in SaaS Market Analysis

Comments about charts with fancy trend lines really are a distraction to what is currently happening in the SaaS marketplace and why Velpic has not received upward valuations considering the good news. A broader look at SaaS startups can explain this effect.

Pull up a chair, grab a coffee and allow me to explain!



As Velpic continues to trade sideways it is important to understand why this is the case in the broader SaaS startup valuation world.


As we can see in the following chart, SaaS EV/Forward revenue multiples are converging to between 4.7X-3.2X. What you can see from the chart is that the highest quartile of growth SaaS companies have received the largest contraction in valuations falling almost half the multiple that they demanded last year. This compares the the mid growth quartile that has fallen relatively minor.

This effect can be seen in the stock charts of high quartile SaaS companies like 1PG and RFN:




We are seeing a converging of EV/Forward Revenue multiples applied to the high/medium growth firms.

This is why on a comparative basis although Velpic is strong fundamentally it has not been valued to the extent that similar placed SaaS companies were one year ago.

Why is this important in the context of Velpic?

If we are able to calculate Velpic's multiple we can draw inferences in likely future valuation prospects.

For the sake of not duplicate posting I refer readers to these revenue estimates: 17544619

Following on from those revenue estimates, at current forecasted growth rates revenue in March 2017 for Velpic will be $548,592 for the month. This is with 3% Dash Digital growth per annum and 16.06% MOM SaaS/PPV fee growth (current what is expected to be achieved over this quarter and pre SME launch). This means the company has forward revenue of $6,583,104 annualised at March 2017.

Velpic currently has an Enterprise Value of $20,980,078 based on calculations at $0.046.

What does this all mean?

EV/Forward Revenue Multiple = $20,980,078 / $6,583,104 = 3.201X

Remember what I said at the start, we are seeing a converging of high/medium growth SaaS companies within a 4.7X - 3.2X band. This means Velpic trades at the end of the lower range.

Comments

We can conclude that as growth is realised Velpic's valuation will track forward revenue. This means that the valuation has potential to grow exponentially (think what the forward revenue will be in March 2018 as we sit as holders in March 2017).

Of course, if growth slows and further capital is required then dilution is a major risk.

This all means that Velpic is currently well priced on a forward revenue basis, however will 'rerate' as growth is realised. This is particularly the case for startups beginning the exponential curved (as compared to your larger SaaS companies).

Model Risks

The forward revenue multiple was based on Dash Digital revenue which is strictly not SaaS. However, as it relates to the SaaS aspect of the business it is not an issue. Other analysts may disagree.

The reason Velpic has traded sideways despite good news is because for this calendar year we have seen a converging of high/medium growth EV/Forward Revenue multiples.

If you believe in the story you should hold and you will be very handsomely rewarded if realised.

Enjoy your coffees!