Every week I’ll provide updates on the latest trends in cloud software companies. Follow along to stay up to date! Checking in on Software Multiples The last 6 weeks (since the start of May) has been quite the run for software companies. The WCLD index is up 30%! The Nasdaq is up 12%. Given this move, where do multiples stand today? And how do today’s multiples relate to interest rates and the underlying growth of these software businesses?
Great article! Two observations + questions for us to consider:
1. Your discussion and chart on Median EV / NTM Revenue / NTM Growth Multiples is helpful but don't we need to layer in a comparison to the 10 year into that chart to really have a baseline? To be at a peak when the 10 year is 40% higher means we're at an all time high by a lot no?
2. I'm noticing that the Mid-Growth Median (15-30%) has made a major move and recently eclipsed the High Growth Median (30%+). Does this mean growth correlation is being overshadowed by profitability? Looking at your historical chart this has almost never happened and would appreciate your thoughts there
As always, great stuff. Another factor likely driving the depressed NTM growth rates relative to historical levels is the dearth of IPO activity. As the last vintage of newly public Software companies continue to mature and growth tempers, the next batch of disruptive growth companies remain private.
Great article! Two observations + questions for us to consider:
1. Your discussion and chart on Median EV / NTM Revenue / NTM Growth Multiples is helpful but don't we need to layer in a comparison to the 10 year into that chart to really have a baseline? To be at a peak when the 10 year is 40% higher means we're at an all time high by a lot no?
2. I'm noticing that the Mid-Growth Median (15-30%) has made a major move and recently eclipsed the High Growth Median (30%+). Does this mean growth correlation is being overshadowed by profitability? Looking at your historical chart this has almost never happened and would appreciate your thoughts there
As always, great stuff. Another factor likely driving the depressed NTM growth rates relative to historical levels is the dearth of IPO activity. As the last vintage of newly public Software companies continue to mature and growth tempers, the next batch of disruptive growth companies remain private.