You need to look at the characteristics of the quartiles to understand their price action.
The businesses in the upper quartile often are stunning growers, with longer trading history and burning multiples of revenue each quarter to achieve this growth.
The businesses in the middle quartile (Velpic) are generally growing revenues less than the upper quartiles, coming from a start up background, or both. They are also closer to break even cash flow.
The upper and middle quartiles appear to be converging, signalling that investors are no longer willing to pay higher EV/Forward Revenue multiples for faster growing SaaS that burn significant cash. They are beginning to value these the same as those with slower growth (still fast though) and doing so with the ability to break even on cash flow soon.
Your lower quartile businesses are characterised as those with low prospects and underperformers. Those who burn cash without the 'SaaS' growth they thought they would achieve.
The interesting part in the diagram is the converging of the upper and middle quartiles. This is not how historically SaaS companies were valued.
To think at one stage Xero demanded a 50X multiple.
VPC Price at posting:
4.6¢ Sentiment: Buy Disclosure: Held
