      cloudedjudgement.substack.com · 2023-09-22
      · 986d
    

Clouded Judgement: Interest Rate Risk & SaaS Valuation Compression

The article examines how persistent elevated interest rates (10Y at 4.5%) are creating a valuation headwind for SaaS companies, particularly because strong economic data signals the Fed will maintain restrictive rates longer than previously expected. The author provides comprehensive SaaS valuation multiples and operating metrics benchmarks, showing a median EV/NTM revenue multiple of 5.6x across the sector, with clear correlation between growth rates and valuation multiples.

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Metrics in this report

10-Year Treasury Yield

4.5percent

As of September 22, 2023

CAC Payback Period

35months

median

Public SaaS companies (gross margin adjusted)

EV / NTM Revenue Multiple

5.6multiple

median

Public SaaS companies

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

11.2multiple

median

High-growth SaaS companies projecting >30% NTM growth

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

3.8multiple

median

Low-growth SaaS companies projecting <15% NTM growth

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

8.1multiple

median

Mid-growth SaaS companies projecting 15-30% NTM growth

Free Cash Flow Margin

7percent

median

Public SaaS companies

G&A as % of Revenue

16percent

median

Public SaaS companies

Gross Margin

75percent

median

Public SaaS companies

Median LTM Revenue Growth Rate

21percent

median

Public SaaS companies

Median NTM Revenue Growth Rate

15percent

median

Public SaaS companies

Net Revenue Retention

114percent

median

Public SaaS companies

Operating Margin

-17percent

median

Public SaaS companies

R&D as % of Revenue

27percent

median

Public SaaS companies

Sales & Marketing as % of Revenue

42percent

median

Public SaaS companies