cloudedjudgement.substack.com · 2021-06-18 · 1812d

Clouded Judgement

Following FOMC commentary signaling potential rate hikes by end of 2022, growth software stocks initially sold off but recovered sharply, suggesting market expectations were priced too conservatively and growth multiples remain resilient to tighter monetary policy. The article analyzes current SaaS valuation multiples, operating metrics across public cloud software companies, and applies the Rule of 40 framework to assess business quality relative to growth expectations.

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Metrics in this report

CAC Payback Period

24months

median

Public SaaS companies on gross profit basis

EV/NTM Revenue Multiple

15.9x

median

Public SaaS companies overall

EV/NTM Revenue Multiple (High Growth >30%)

25.5x

median

High-growth SaaS companies

EV/NTM Revenue Multiple (Low Growth <15%)

5.4x

median

Low-growth SaaS companies

EV/NTM Revenue Multiple (Mid Growth 15-30%)

12.9x

median

Mid-growth SaaS companies

Free Cash Flow Margin

10percent

median

Public SaaS companies

G&A Spend

18percent of revenue

median

Public SaaS companies

Gross Margin

74percent

median

Public SaaS companies

LTM Revenue Growth Rate

30percent

median

Public SaaS companies

NTM Revenue Growth Rate

23percent

median

Public SaaS companies

Net Revenue Retention

118percent

median

Public SaaS companies

Operating Margin

-13percent

median

Public SaaS companies

R&D Spend

25percent of revenue

median

Public SaaS companies

Sales & Marketing Spend

43percent of revenue

median

Public SaaS companies