I didn’t mean to start a Cloudflare vs. Docusign war, but it looks like you’ve doubled down on this Franklin29! I like the way you wrote up the compares though and just trying to stick to the numbers.
I, like you, though not a valuation snob do look at valuation in a similar manner that you do, and I’d be lying if that wasn’t a small part of my decision making.
I don’t think anyone is going to claim with a straight face that Docusign’s revenue growth in 2021 and beyond is going to consistently outpace Cloudflare’s revenue growth, but like you said they are still pretty close and obviously Docusign outperformed on a relative basis rather significantly in 2020 (fully acknowledging the COVID pull forward) while at more than 3x the revenue base.
At some point as an investor I guess you just have to decide how much all these other factors like margin expansion (both operating and profit), earnings expansion, customer expansion, free cash flow expansion, retention rate expansion, etc. matter to you relative to revenue growth. If the growth rate continues to decline into the 30’s and point lower than it may still be a “good” investment if they are killing it in other areas, but not appropriate for this board. At this point I don’t think anyone is close to concluding that for either of these companies based on following the actual results to-date.
FWIW, I sold out of my small position in Cloudflare the day after their report because I felt they should be growing faster at their size and with their opportunity than they currently are and/or guiding stronger such that even with beats their rate of growth would trend higher than hovering around 50%, and we all only have so many companies to put out money into, so it missed my cut FOR NOW…they are absolutely still on my radar to put back in my portfolio if they crush it the next few quarters and I do love the long term play and think they’ve been executing much better than their chief competitor (Fastly).
-Chris