One thing that is a clear risk factor is growth slowing down in our companies. I have been building up a dataset on recent revenues, gross profits, and valuation metrics, for some of our companies. I found the growth results to be a bit interesting, and I thought I would share them. I apologize in advance if I can't get the formatting right. Company QoQ Growth YoY 6-mon Growth YoY Growth % StoneCo. 58% 65% 62% The Trade Desk 11% 40% 38% Zoom 57% 90% 85% Alteryx 104% 62% 65% Zscaler 35% 50% 48% Guardant Health 51% 180% 181% DocuSign 24% 40% 40% Okta 36% 47% 45% Coupa 28% 53% 51% Crowdstrike 77% 91% 88% Roku 17% 55% 50% Atlassian 34% 36% 36% MongoDB 18% 63% 60% Definitions: QoQ - Most recently reported sequential quarter growth rate, annualized e.g. ((Q4-Q3)/Q3)*4 YoY 6-mon - Most recently reported last two quarters compared to the same two quarters in the prior year e.g. (Q4+Q3-yQ4-yQ3)/(yQ4+yQ3) Y-Y Growth - The most recently reported growth rate comparing prior year qtr I see huge red flags in this dataset on slowing growth from: The Trade Desk DocuSign Coupa Roku MongoDB I exempt zoom from the list because, to be honest, it's hard to complain about 57% annualized sequential growth. But there is some significant slowing there. And we see the amazing quarter that Alteryx put up --- in exploding sequential growth. I own a lot and I'm still a buyer. Now one quarter does not a trend make, as they say. Of the "red flag" companies, I only own The Trade Desk. But if I do not see a some reaccelerating going on next quarter, I may sell. I am still playing with looking at different statistics so I may be able to share more later. I apologize if any of my data is incorrect. I have hand entered many values from the earnings releases, and of course the formulas. There could well be issues. If you see them, please let me know, and I will correct. Thanks, Rob
I only own The Trade Desk. But if I do not see a some reaccelerating going on next
quarter, I may sell.
According to their last earning report, they expect Q4 revenue of $213M. (Q3 was 164).
(213-164)/164=29.9%, so reaccelerating, but not at the level of ZM/CRWD/AYX…
Of course, Saul points out that most of these companies sandbag guidance so they could very well top $213M.
This analysis has some flaws in it. Namely that not all quarters are created equal. Our companies have certain seasonality built in. Most have Q4 as the biggest Billings quarter as existing customers renew. Some are other quarters as well.
But the biggest problem is with Roku.
ROKU has a monster 4th(holiday) quarter. For instance last Q4 ROKU grew 59% over Q3($276M vs $173M). ROKU reported $261M this Q3. Guidance for next quarter is $396 which is 52% growth sequentially. This is why we compare quarters to year ago quarters. Like to likes to determine performance. So if you annualized that quarter, well that would be ridiculous.
I’m not saying you can’t gleam valuable info from quarter to quarter, but you may miss a lot if you try to annualize one quarter over one quarter only.
I agree with you, and particularly about Roku. Roku is very seasonal at the moment in its life cycle. But most others are not very seasonal from my impression and there isn’t any reason for them to be based upon their business models.
I don’t plan on using this list as a “sell now” list but merely a probation. No way should you sell a company based upon one Q results (unless they are just game changing for whatever reason).
On the other hand when companies report the headline of 40% growth (from the prior year period) and their implied growth rate going forward is in the teens, it’s a watch out.
Thanks for your views and very good points!