cloudedjudgement.substack.com · 2023-11-03 · 944d

Clouded Judgement: No Sign of Re-Acceleration in Software

Q3 2023 software earnings revealed massive valuation corrections as companies missed Q4 guidance and showed no signs of the growth re-acceleration the market had priced in, with 72% of companies guiding below consensus. Software stocks remain expensive on a growth-adjusted basis, but companies without free cash flow support face a particularly severe valuation floor problem as they transition from growth to mature-stage metrics.

15 metrics· Cited 0× in the knowledge base ·Open source ↗

Metrics in this report

10-Year Treasury Yield

4.7percent

As of article publication, Q3 2023

Growth-Adjusted Multiple (EV/NTM Rev / NTM Growth)

0.35x

median

Public SaaS companies, Q3 2023

Growth-Adjusted Multiple (Long-term Average)

0.28x

average

Public SaaS companies, historical baseline

Median CAC Payback Period

35months

median

Public SaaS companies

Median FCF Margin

8percent

median

Public SaaS companies

Median Gross Margin

75percent

median

Public SaaS companies

Median NTM Growth Rate

15percent

median

Public SaaS companies

Median Net Revenue Retention

114percent

median

Public SaaS companies

Median Operating Margin

-16percent

median

Public SaaS companies

NTM FCF Multiple (Historical Average)

40x

average

Public SaaS companies with positive FCF, historical baseline

NTM FCF Multiple (Low Growth Companies)

33x

median

Public SaaS companies with positive FCF below 100x multiple

NTM Revenue Multiple

5.4x

median

Public SaaS companies, Q3 2023

NTM Revenue Multiple (Long-term Average)

7.8x

average

Public SaaS companies, historical baseline

Q3 2023 Companies Guiding Below Consensus

72percent

Public SaaS companies, Q3 2023 earnings season

Q3 2023 Median Guide vs Consensus

-0.25percent

Public SaaS companies, Q3 2023 earnings guidance