A question for Dreamer, if he’s still there.
When Bear challenged me as to why I feel differently about ESTC than about MDB, it made me think about it and I learned from it. (See #61547), and it also provoked a very useful post from tamhas which I learned from as well, and then othalan posted another very useful post, that I learned more from, and others countered him. That’s how it works on this board.
So I’d like to pose a question to you. You like Elastic better than Datadog because it’s at half the price, and you say that will give you a better CAGR, but exactly how WILL you get a better CAGR from:
A company that is growing revenue 30% lower than the other, (58% to 88%) and with revenue growth falling while the other is accelerating
A company that is losing more money each quarter, while the other has arrived at break-even,
A company that is increasing their cash flow losses while the other company is cash flow positive.
You also say that we have no experience with a stock like Datadog with 40x EV/S. But you are using trailing 12-month revenue during a period that the company was growing over 100% so that’s ridiculously out of date for the early quarters.
If you just take the current run rate (revenue last quarter x 4) they are at a current EV/S of 30 and if you look forward for your EV/S, and drop the revenue growth rate from the current 88% all the way down to 75% (although there is no actual sign of slowing, in fact the actual growth rate is rising each quarter), you get a forward EVS of 23. (At that point the then current run rate will give you a current EV/S of 17, at the highest.) And DDOG will have lots more positive cash flow and ESTC will undoubtedly still be negative. So again, where will you get more CAGR from ESTC?
When I sold out of my Shopify last August, it was at 537% of what I had paid for it two years previously. If I had bought it at twice the price it would have been at 268% of what I paid for it. Still, not bad for two years.
Okta is almost a quadruple, at 390% of what I paid for it, a year and ten months ago. It was 440% (well over a quadrple), at the end of August.
Alteryx is a triple, at 340% what I paid for it a year and eleven months ago. It was a quintuple at the end of August (over 500%).
When I sold it, Twilio was ….
Well you get the picture. I would have had a fine CAGR with any of them if I had paid twice as much as I did.
So again, how would you have a better CAGR with a company that is loathe to make a profit, compared with a company that is already on its way and growing much faster.