A potential way to improve OOMPH factor

After so much discussion and worry on the valuation of our SAAS stocks It appears if we can address a few statistical factors and add them together we may be able to more accurately value and compare our growth SAAS stocks, and improve upon the current OOMPH factor that was created by the brilliant members of this board.

https://www.thesaascfo.com/simple-sales-efficiency-metrics-s…

I apologize if I am incorrect as I am still learning a lot and Perhaps everyone already knows the importance of all these factors, I do think the OOMPH rating is very interesting but it doesn’t take into account the effective sales efficiency coefficient.

As we already know the first important factor is revenue growth rate, and if it is accelerating or decelerating.

Secondly DBNR, Dollar based net retention rate is very important. A large number like TWILIO, above 140% means that even without growing new customers, existing customers are generating 40% more revenue alone!

Gross margins are another very important favor to take into account, AYX leads the pack at 90% and potentially growing.

Finally I have discovered that we should factor in effective sales efficiency coefficient.
“the sales efficiency coefficient measures gross profit increase over a period divided by sales & marketing investment. The company has an incredibly strong magic number of 1.2. A magic number of over 1.0 the business paid back its customer acquisition costs in a one-year timeframe.”
With appreciation slowing on the best of our companies, and the uncertainty in an all time high market I think that If we could figure out a way to add this factor to the OOMPH rating I think we might be able to compare companies to seek additional new opportunities in future share price appreciation.

I stumbled across this article when doing some research on Fastly. For reference the article is:

https://medium.com/memory-leak/fastly-s-1-analysis-accelerat…

Fastly has a low P/S number, especially considering it has a pretty high DBNR rate and an effective sales efficiency coefficient. The thing that concerns me most is it’s lower gross margins, around 50% and that it’s such a new IPO and therefore very volatile, the quiet period just ended on June 26th but the lockup isn’t until November. So I wouldn’t want to make a large position until after that settles and after I see at least one more quarter to determine if growth is accelerating or decelerating.

I hope that this was a helpful contribution and that some of the very wise and original board members can contribute and possibly figure out a way to add the factor of how well companies utilize marketing dollars.

Thanks!
Harrison

10 Likes