Modern Growth Investing SaaS Insights - Updated 08/07/2022

We look at the SaaS industry as a whole and find GARP businesses.

Disclaimer: The information provided is not financial, investment, tax, or other advice. Nothing contained constitutes a solicitation, recommendation, endorsement, or offer to buy or sell securities or other financial instruments. For more information, read the disclaimer.

Hey Everyone, I hope you have a great weekend. I wanted to share my coverage of insights for the SaaS industry, and I will be calling these articles "Modern Growth Investing SaaS Insights" and provide updates regularly.

Modern Growth Investing
SaaS, Tech Hyper & High Growth Investing in High-Quality Compounding Businesses with a Sustainable Moat.

Why do I look at the SaaS/Tech industry as a whole?

SaaS/Technology industry is my primary circle of competence. This is the industry that I have the most insights about. I build and use a lot of different software daily, so it’s easy for me to dive into SaaS/Tech companies and get a sense of what they are doing, relate it to my daily life and gain insights into whether some SaaS business is something I want to spend my time learning about and exploring for an investment opportunity.

In general, I want to know about all the SaaS companies; that way, at least I have seen all of them, and I have more chances of finding outstanding ones that are priced reasonably. Looking at the industry as a whole also informs me about the mean and median valuations in the industry so that I can avoid getting myself into really crazy valuations. It also gives me a guide to whether I am getting a business with a better growth profile for a significant discount than the industry.

This is also a form of idea generation as I will notice new businesses that enter the industry, and I get to identify new opportunities.

How often do I look at the industry?

I try to keep myself updated about the industry every month and sometimes every few months if I am busy with my life.

What insights do I look for in the industry?

In general, I try to get a feel for the SaaS metrics for the industry and identify patterns that give me quantitative and qualitative insights into a company through a metric.

I also use a valuation approach to sort companies in a way where I get the maximum value for my investment. I use a ratio of Rule of 40 LTM and EV/Revenues LTM  for a valuation approach that balances growth and value, and the results are sorted in order of GARP(Growth At Reasonable Price).

Following are the SaaS industry metrics for 08/07/2022

Name
ValuationRevenue MultipleRevenue Growth
LTM Revenue
Gross Margin
Operating Margin
FCF Margin
Rule of 40
LTM Operating Expenses %Revenue
Net Expansion
GM Adjusted Payback
Share Price PerformanceValuation
LTM Revenue
Revenue Multiple
Rule of 40 NTM
Rule of 40 NTM Adjusted
Rule of 40 LTM/ EV/Revenues LTM
Rule of 40 NTM/ EV/Revenues NTM
Rule of 40 adjusted *100/ ev/NTM
EV(millions)
LTM Revenue(Millions)
FCF Margin
FCF(Millions)
FCF Yield
EV/FCF
Rule of 40 NTM/ EV/FCF
NTM Growth
GP(millions)
EV/GP
Rule of 40 LTM/ EV/GP
Rule of 40 NTM/ EV/GP
NTM Revenue Multiple
R&D %
Market CapEVLTMNTM2022LTMNTMS&MR&DG&ASBCCurrent% Week%30 DaysYTDCurrentMarket CapEVLTMNTM2022
Overall Average10.2x7.8x6.7x37%24%$1,51772%-26%3%41%46%30%22%23%120%46 Months11%7%-37%
Overall Median8.8x7.3x6.1x32%23%$61174%-24%2%41%46%27%20%19%120%36 Months11%7%-38%
Hyper Growth Median (>50% NTM)26.Ox18.2x14.3x108%57%$40570%-54%-10%93%67%37%36%39%131%27 Months10%6%-46%
High Growth Median (>30% NTM)15.Ox10.7x8.5x61%38%$52076%-33%-2%53%56%30%24%22%126%26 Months13%4%-45%
Mid Growth Median (>15% NTM)8.8x7.1x6.2x31%22%$61174%-23%3%38%47%27%20%18%120%42 Months11%10%-34%
Low Growth Median (<15% NTM)2.8x2.5x2.3x17%11%$79772%-18%4%25%36%25%17%17%106%139 Months6%0%-39%
25th Percentile5.2x4.3x3.8x21%18%$34367%-39%-7%25%34%22%15%13%115%49 Months6%-1%-52%
75th Percentile12.8x10.1 x8.6x44%30%$1,28779%-8%16%51%56%35%26%27%127%26 Months15%15%-24%
90th Percentile21.8x16.1 x13.4x64%39%$2,81683%8%31%66%70%46%34%44%132%12 Months20%21%-11%
SentinelOne$7,326$5,73823.4x12.3x8.5x118%90%$24663%-120%-49%70%75%63%45%43%131%16 Months$265%4%-48%$26$7,326$5,738$24623.412.38.541%41%2.993.333.3333333335738246-49%-120.54-2.10-47.60-0.8690.00154.9837.024132151.8906587661.10738584912.30.63
Snowflake$51,138$47,52933.6x21.2x15.4x98%59%$1,41364%-49%18%116%58%36%19%44%174%27 Months$16112%4%-53%$161$51,138$47,529$1,41333.621.215.477%77%3.453.633.63207547247529141318%254.340.54186.870.4159.00904.3252.557722932.2070971411.46505586121.20.36
Bill.com$14,748$13,82826.6x17.1 x13.4x157%55%$52077%-58%1%158%51%35%49%34%NA31 Months$1417%12%-43%$141$14,748$13,828$52026.617.113.456%56%5.943.273.274853801138285201%5.20.042,659.230.0255.00400.434.535464544.5750072321.6215215517.10.35
GitLab$9,354$8,45529.1x19.2x15.2x68%52%$29088%-50%-21%47%75%37%26%15%130%26 Months$6314%7%-27%$63$9,354$8,455$29029.119.215.231%31%1.621.611.6145833338455290-21%-60.9-0.72-138.83-0.2252.00255.233.130877741.4186162030.935683027819.20.37
Monday.com$5,468$4,68013.1 x8.8x7.1x90%49%$35887%-44%-2%89%90%24%17%23%125%20 Months$12219%2%-61%$122$5,468$4,680$35813.18.87.147%47%6.795.345.3409090914680358-2%-7.16-0.15-653.63-0.0749.00311.4615.026006555.9230641033.1279102568.80.24
CrowdStrike$43,917$42,55126.Ox17.8x14.3x64%46%$1,63774%-8%31%95%41%25%15%22%120%12 Months$1894%1%-8%$189$43,917$42,551$1,6372617.814.377%77%3.654.334.32584269742551163731%507.471.1983.850.9246.001211.3835.126054582.7045451342.19210500317.80.25
Datadog$34,806$33,91424.8x17.8x15.4x79%40%$1,36678%0%30%109%28%41%8%17%130%9 Months$11015%2%-38%$110$34,806$33,914$1,36624.817.815.470%70%4.403.933.9325842733914136630%409.81.2182.760.8540.001065.4831.829785643.4244654132.19919797117.80.41
Zscaler$22,980$22,32823.Ox16.4x13.4x61%40%$97077%-32%21%82%68%28%14%39%125%22 Months$1626%-3%-50%$162$22,980$22,328$9702316.413.461%61%3.573.723.7195121952232897021%203.70.91109.610.5640.00746.929.894229482.74300432.04052758916.40.28
Braze$4,481$4,01115.Ox10.7x8.5x61%40%$26867%-39%-7%55%56%26%25%21%127%29 Months$4811%10%-38%$48$4,481$4,011$2681510.78.533%33%3.673.083.084112154011268-7%-18.76-0.47-213.81-0.1540.00179.5622.337937182.4621790081.47730740510.70.26
nCino$3,929$3,90112.8x9.2x7.7x38%39%$30659%-27%-12%26%31%30%26%11%NA6 Months$3613%-1%-35%$36$3,929$3,901$30612.89.27.727%27%2.032.932.9347826093901306-12%-36.72-0.94-106.24-0.2539.00180.5421.607400021.2032914641.2495719059.20.3
Cloudflare$19,134$18,98323.4x16.9x14.6x53%38%$81378%-19%-12%41%49%30%18%15%126%18 Months$5820%16%-56%$58$19,134$18,983$81323.416.914.626%26%1.751.541.53846153818983813-12%-97.56-0.51-194.58-0.1338.00634.1429.935030121.3696328290.868547647916.90.3
Asana$4,443$4,41510.5x7.7x6.2x65%37%$42290%-74%-34%31%76%54%33%30%120%34 Months$2323%16%-69%$23$4,443$4,415$42210.57.76.23%3%2.950.390.38961038964415422-34%-143.48-3.25-30.77-0.1037.00379.811.624539232.6667723670.25807474527.70.54
Smartsheet$4,413$4,0436.7x5.Ox4.1x44%35%$60279%-33%-2%42%62%30%20%22%133%39 Months$3413%-1%-56%$34$4,413$4,043$6026.754.133%33%6.276.606.64043602-2%-12.04-0.30-335.80-0.1035.00475.588.5011985374.9404798423.8818055950.3
Olo$2,250$1,80711.6x8.6x7.3x32%34%$15676%-21%6%38%14%39%44%23%107%10 Months$1432%27%-32%$14$2,250$1,807$15611.68.67.340%40%3.284.654.65116279118071566%9.360.52193.060.2134.00118.5615.241228072.493237412.6244604328.60.39
Zoomlnfo$18,825$19,76821.3x16.Ox14.Ox57%33%$92982%15%32%90%35%18%12%16%NA12 Months$4724%27%-27%$47$18,825$19,768$92921.3161465%65%4.234.064.06251976892932%297.281.5066.500.9833.00761.7825.949749273.4682416032.504841157160.18
Confluent$9,118$8,27917.Ox12.8x11.1x64%33%$48863%-90%-28%37%83%46%23%48%130%38 Months$3228%19%-58%$32$9,118$8,279$4881712.811.15%5%2.180.390.3906258279488-28%-136.64-1.65-60.59-0.0833.00307.4426.928831641.3739920280.185674598412.80.46
Okta$16,420$16,31911.1x8.4x6.8x62%33%$1,46468%-63%4%66%60%38%33%46%123%34 Months$1046%1%-54%$104$16,420$16,319$1,46411.18.46.837%37%5.954.404.4047619051631914644%58.560.36278.670.1333.00995.5216.392438124.0262467062.2571383058.40.38
Alteryx$4,220$4,7787.5x5.7x5.2x20%33%$63686%-41%-7%13%63%28%26%28%120%39 Months$6227%20%2%$62$4,220$4,778$6367.55.75.226%26%1.734.564.5614035094778636-7%-44.52-0.93-107.32-0.2433.00546.968.7355565311.4881707832.9763415665.70.28
Sprout Social$3,185$3,02713.7x10.4x9.2x41%31%$22175%-15%8%49%45%22%24%13%NA36 Months$5813%-8%-36%$58$3,185$3,027$22113.710.49.239%39%3.583.753.7530272218%17.680.58171.210.2331.00165.7518.262443442.6831020812.13553022810.40.22
Digital Ocean$4,495$4,4049.5x7.3x6.Ox36%31%$46262%-6%8%45%13%28%26%18%117%10 Months$4411%-1%-45%$44$4,495$4,404$4629.57.3639%39%4.745.345.34246575344044628%36.960.84119.160.3331.00286.4415.374947632.9268392372.5365940057.30.28
Twilio$17,839$13,8794.4x3.4x2.8x57%31%$3,12749%-30%-4%53%36%27%15%21%127%63 Months$9815%9%-63%$98$17,839$13,879$3,1274.43.42.827%27%12.057.947.941176471138793127-4%-125.08-0.90-110.96-0.2431.001532.239.0580395895.8511557032.9807774343.40.27
Samsara$8,147$7,42715.4x11.8x9.6x69%30%$48371%-79%-43%25%68%46%37%56%122%42 Months$169%22%-43%$16$8,147$7,427$48315.411.89.6-13%-13%1.62-1.10-1.1016949157427483-43%-207.69-2.80-35.760.3630.00342.9321.657481121.154335533-0.600254476911.80.46
WalkMe$861$5512.7x2.1x1.7x32%30%$20776%-45%-25%7%70%26%26%17%121%58 Months$1010%-8%-48%$10$861$551$2072.72.11.75%5%2.592.382.380952381551207-25%-51.75-9.39-10.65-0.4730.00157.323.5024154591.998620691.4275862072.10.26
HubSpot$17,069$16,61511.7x9.1x7.7x47%29%$1,41580%-4%17%64%50%23%11%13%NA25 Months$35518%8%-46%$355$17,069$16,615$1,41511.79.17.746%46%5.475.055.05494505516615141517%240.551.4569.070.6729.00113214.677561844.3603972313.134035519.10.23
Amplitude$2,039$1,7388.4x6.6x5.8x60%29%$20669%-18%-22%38%52%31%34%24%126%24 Months$1823%15%-66%$18$2,039$1,738$2068.46.65.87%7%4.521.061.0606060611738206-22%-45.32-2.61-38.35-0.1829.00142.1412.227381453.1077790560.57248561576.60.31
JFrog$2,463$2,0588.4x6.5x5.8x39%29%$24479%-34%9%48%47%41%25%26%132%28 Months$2512%8%-16%$25$2,463$2,058$2448.46.55.838%38%5.715.855.84615384620582449%21.961.0793.720.4129.00192.7610.67648894.4958600583.5592225466.50.41
MongoDB$23,219$22,58223.1x18.Ox14.6x52%28%$97871%-31%0%52%54%35%14%29%120%36 Months$34115%12%-36%$341$23,219$22,582$97823.11814.628%28%2.251.561.555555556225829780%00.00#DIV/0!#DIV/0!28.00694.3832.521097961.5989620050.8609795412180.35
Hashicorp$6,806$5,48315.5x12.1 x9.9x51%28%$35580%-99%-20%31%88%55%37%69%133%117 Months$372%13%-59%$37$6,806$5,483$35515.512.19.98%8%2.000.660.66115702485483355-20%-71-1.29-77.23-0.1028.0028419.306338031.6056903160.414371694312.10.55
PagerDuty$2,452$2,2927.6x5.9x5.Ox33%28%$30382%-37%-5%28%56%35%28%27%121%23 Months$287%3%-20%$28$2,452$2,292$3037.65.9523%23%3.683.903.8983050852292303-5%-15.15-0.66-151.29-0.1528.00248.469.2248249223.0352879582.4932722515.90.35
Palantir$23,167$20,91312.7x10.Ox8.3x37%27%$1,64778%-20%14%50%39%23%37%45%124%NA$1112%12%-38%$11$23,167$20,913$1,64712.7108.341%41%3.944.104.120913164714%230.581.1090.700.4527.001284.6616.279015463.0714388182.518579831100.23
CS Disco$1,595$1,35810.6x8.3x6.8x73%27%$12873%-26%-25%48%44%32%24%7%NA76 Months$2712%28%-24%$27$1,595$1,358$12810.68.36.82%2%4.530.240.24096385541358128-25%-32-2.36-42.44-0.0527.0093.4414.533390413.3027393230.13761413848.30.32
Jamf$3,257$3,4558.8x6.9x6.Ox36%27%$39474%-24%13%49%42%23%27%12%120%43 Months$2710%0%-29%$27$3,257$3,455$3948.86.9640%40%5.575.805.797101449345539413%51.221.4867.450.5927.00291.5611.850048024.1350043423.3755137486.90.23
Freshworks$4,376$3,2287.4x5.8x5.2x42%27%$43879%-62%0%42%71%34%36%54%115%38 Months$1520%4%-41%$15$4,376$3,228$4387.45.85.227%27%5.684.664.65517241432284380%00.00#DIV/0!#DIV/0!27.00346.029.3289405244.5021189592.8942193315.80.34
Elastic$8,233$7,9669.2x7.3x6.Ox42%26%$86273%-20%0%42%47%32%14%16%129%36 Months$8710%15%-29%$87$8,233$7,966$8629.27.3626%26%4.573.563.56164383679668620%00.00#DIV/0!#DIV/0!26.00629.2612.659314113.317715292.0538237517.30.32
Atlassian$58,575$58,60920.9x16.8x14.7x34%24%$2,80383%-2%32%67%20%49%17%24%NA13 Months$23012%11%-40%$230$58,575$58,609$2,80320.916.814.756%56%3.213.333.33333333358609280332%896.961.5365.340.8624.002326.4925.192027472.6595715682.22292548916.80.49
Paycom$21,656$21,40617.7x14.2x12.9x30%24%$1,21285%25%19%49%25%11%20%8%NANA$36110%15%-13%$361$21,656$21,406$1,21217.714.212.943%43%2.773.033.02816901421406121219%230.281.0892.960.4624.001030.220.778489612.3582079792.06944781814.20.11
Paylocity$12,484$12,46715.8x12.7x11.Ox32%24%$79166%9%16%48%25%12%19%11%NANA$22615%20%-4%$226$12,484$12,467$79115.812.71140%40%3.043.153.1496062991246779116%126.561.0298.510.4124.00522.0623.880396892.0100168441.67501403712.70.12
Procore$8,410$7,93613.Ox10.5x9.5x36%24%$61080%-61%0%36%62%47%32%45%NA29 Months$6222%27%-22%$62$8,410$7,936$6101310.59.524%24%2.772.292.28571428679366100%00.00#DIV/0!#DIV/0!24.0048816.262295082.2137096771.47580645210.50.47
BlackLine$4,011$4,4049.9x7.9x6.9x21%24%$44776%-10%10%31%48%19%20%15%110%49 Months$687%-7%-35%$68$4,011$4,404$4479.97.96.934%34%3.134.304.303797468440444710%44.71.0198.520.3524.00339.7212.96361712.3913079022.6227247967.90.19
ServiceNow$99,586$97,89614.8x12.1 x10.9x28%23%$6,60078%3%31%58%39%24%10%19%NA96 Months$49313%-1%-24%$493$99,586$97,896$6,60014.812.110.954%54%3.924.464.46280991797896660031%20462.0947.851.1323.00514819.016317023.0500122582.83966658512.10.24
Five9$8,112$8,40312.Ox9.8x8.9x34%23%$70054%-12%-3%31%33%19%14%21%NA59 Months$11618%17%-16%$116$8,112$8,403$700129.88.920%20%2.582.042.0408163278403700-3%-21-0.25-400.14-0.0523.0037822.230158731.3945019640.89967868629.80.19
Splunk$18,050$20,6827.3x5.9x5.1x24%23%$2,84673%-35%7%30%55%36%17%29%130%78 Months$1128%19%-3%$112$18,050$20,682$2,8467.35.95.130%30%4.115.085.0847457632068228467%199.220.96103.810.2923.002077.589.9548513173.0136060343.0136060345.90.36
Zendesk$9,391$9,1186.Ox4.9x4.4x31%23%$1,51880%-16%10%40%51%27%18%17%121%40 Months$761%2%-27%$76$9,391$9,118$1,51864.94.433%33%6.676.736.7346938789118151810%151.81.6660.070.5523.001214.47.5082345195.3274840974.395174384.90.27
BigCommerce$1,334$1,3085.5x4.4x3.8x44%23%$23976%-28%-22%22%46%30%26%12%NA42 Months$1818%-1%-48%$18$1,334$1,308$2395.54.43.81%1%4.000.230.22727272731308239-22%-52.58-4.02-24.88-0.0423.00181.647.2010570363.0551070340.13886850154.40.3
C3$2,235$1,3105.2x4.2x3.6x38%23%$25375%-78%-36%2%69%60%24%45%NANM$2113%4%-33%$21$2,235$1,310$2535.24.23.6-13%-13%0.38-3.10-3.0952380951310253-36%-91.08-6.95-14.380.9023.00189.756.9038208170.2896946565-1.8830152674.20.6
AppFolio$3,745$3,6858.9x7.3x6.7x28%22%$41459%-13%4%32%22%21%21%7%NA11 Months$1073%11%-12%$107$3,745$3,685$4148.97.36.726%26%3.603.563.56164383636854144%16.560.45222.520.1222.00244.2615.086383362.1211180461.7234084127.30.21
Sprinklr$3,273$2,7585.2x4.3x3.7x30%22%$52670%-19%-6%24%60%12%17%10%123%33 Months$1312%15%-20%$13$3,273$2,758$5265.24.33.716%16%4.623.723.7209302332758526-6%-31.56-1.14-87.39-0.1822.00368.27.4904942973.2040609142.1360406094.30.12
Dynatrace$11,706$11,43811.6x9.6x8.6x30%21%$98781%8%29%60%39%17%14%11%120%36 Months$419%-3%-32%$41$11,706$11,438$98711.69.68.650%50%5.175.215.2083333331143898729%286.232.5039.961.2521.00799.4714.306978374.193757653.4947980429.60.17
Avalara$8,269$7,80510.4x8.6x7.4x38%21%$75070%-17%4%42%43%24%20%15%115%36 Months$948%24%-27%$94$8,269$7,805$75010.48.67.425%25%4.042.912.90697674478057504%300.38260.170.1021.0052514.866666672.8251121081.681614358.60.24
Shopify$51,740$45,9789.2x7.6x6.7x30%21%$5,00252%-6%1%31%23%23%9%9%NANA$4114%21%-70%$41$51,740$45,978$5,0029.27.66.722%22%3.372.892.8947368424597850021%50.020.11919.190.0221.002601.0417.676775441.7537135151.2445708827.60.23
Tenable$4,687$4,5967.5x6.2x5.6x26%21%$61179%-11%15%41%52%22%16%16%NA72 Months$4210%-13%-24%$42$4,687$4,596$6117.56.25.636%36%5.475.815.806451613459661115%91.651.9950.150.7221.00482.699.5216391474.3059812883.7808616196.20.22
Qualtrics$7,337$6,8375.3x4.4x4.Ox43%21%$1,28072%-90%-5%38%62%32%68%86%126%47 Months$13-4%-5%-65%$13$7,337$6,837$1,2805.34.4416%16%7.173.643.63636363668371280-5%-64-0.94-106.83-0.1521.00921.67.4186197925.1222465992.156735414.40.32
Domo$1,109$1,1514.2x3.5x3.Ox23%21%$27274%-38%-1%22%57%32%22%28%110%31 Months$3315%10%-34%$33$1,109$1,151$2724.23.5320%20%5.245.715.7142857141151272-1%-2.72-0.24-423.16-0.0521.00201.285.7184022263.8472284973.4974804523.50.32
RingCentral$4,650$6,2053.4x2.8x2.5x33%21%$1,81870%-21%9%42%54%20%18%23%99%49 Months$49-7%-20%-74%$49$4,650$6,205$1,8183.42.82.530%30%12.3510.7110.71428571620518189%163.622.6437.920.7921.001272.64.8758447278.6138920236.1527800162.80.2
Unity$13,515$13,53111.3x9.4x7.6x42%20%$1,19676%-49%3%45%32%64%30%32%135%NA$4521%7%-68%$45$13,515$13,531$1,19611.39.47.623%23%3.982.452.4468085111353111963%35.880.27377.120.0620.00908.9614.886243623.0229251351.5450506249.40.64
UiPath$11,597$9,84410.3x8.6x7.2x40%20%$95183%-40%-11%28%72%27%25%39%138%50 Months$2114%4%-51%$21$11,597$9,844$95110.38.67.29%9%2.721.051.0465116289844951-11%-104.61-1.06-94.10-0.1020.00789.3312.471336452.2451483140.72165481518.60.27
Workday$41,232$39,3617.3x6.1x5.3x21%20%$5,39872%-3%26%46%29%37%9%21%NA40 Months$1636%11%-41%$163$41,232$39,361$5,3987.36.15.346%46%6.307.547.54098360739361539826%1403.483.5728.051.6420.003886.5610.12746494.5421041134.5421041136.10.37
Appian$4,015$3,93410.Ox8.4x7.4x25%19%$39572%-25%-20%5%45%27%24%6%117%22 Months$5515%9%-15%$55$4,015$3,934$395108.4