Thanks a lot for the informative reply mate! Much appreciated!...

First 131 Last

Share
Profile

Follow
BlazingMountain

32 Posts.

17/06/16

21:41

Post #: 18061571
Share

Originally posted by TheLittlePrince ↑

Happy to help!

A common valuation method within the SaaS industry is EV/Forward Revenue.

When you calculate that, you will get a number.

The lines on that graph represent the average multiple of each quartile.

What I mean by that is as follows. Assume we have eight SaaS companies ordered in speed of their revenue growth.

a, b, c, d, e, f, g, h

a & b = quartile 1 (fastest growing)
c & d = quartile 2 (medium high growth)
etc

The average EV/Forward Revenue multiple of the fastest revenue growing quarter (companies a and b) will form the pink line (highest multiples). The second fastest quartile (c and d) will form the blue line. And so on.

As you can see, the fastest growing SaaS companies have suffered a much larger contraction in multiples then the slower growing companies.

What this indicates is that the market is consolidating multiples on fast growth SaaS firms. Why? Primarily due to cash burn. Fast growth generally means more cash burn and we are tending to see companies that grow at a medium pace closer to break even demand similar multiples.

I hope this helps!

Expand

Thanks a lot for the informative reply mate! Much appreciated!

Just one more question: there were supposed to be four quartiles but why are there 5 colours? What does the grey broken line at the bottom represent?

@accaeric sorry to put you in that situation. i didn't get to see what you post tho...
so do you still go there often (only a Y/N question lol)?

1PG Price at posting: 38.0¢ Sentiment: None Disclosure: Not Held
Upvote

0 Great analysis

Reply

Top Stories

MTS

'Outperforming' Metcash books profits lift – even as illegal tobacco rocks sales

ASX Market Close: Virgin soars on IPO | June 24, 2025

Listen: HotCopper Wire Podcast 014 – Abu Dhabi wants to buy our 'true' oil and gas gem

Virgin joins Greatland, VBX Ltd as IPO market heats up ahead of FY26

SPN

Sparc opens small-scale green H2 plant in SA, but liquidity dried up

This thread is closed.

You may not reply to this discussion at this time.

First 131 Last

Add to My Watchlist

What is My Watchlist?

A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.

Thanks a lot for the informative reply mate! Much appreciated!...

Top Stories

'Outperforming' Metcash books profits lift – even as illegal tobacco rocks sales

ASX Market Close: Virgin soars on IPO | June 24, 2025

Listen: HotCopper Wire Podcast 014 – Abu Dhabi wants to buy our 'true' oil and gas gem

Virgin joins Greatland, VBX Ltd as IPO market heats up ahead of FY26

Sparc opens small-scale green H2 plant in SA, but liquidity dried up

Featured News