Growth Rates of my Companies

Investment Analysis Clubs Saul’s Investing Discussions
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Just for fun I thought I’d average the growth rates on my ten companies. Here’s an approximation.


**Alteryx     	50%**
**MongoDB     	49%**
**Nutanix     	65%**
**Okta        	60%**
**Pivotal		69%**
**Pure Storage	40%**
**Shop 		68%**
**Square		51%**
**Twilio		61%**
**Zscaler		49%**

That’s a pretty extraordinary list. They averaged 56.2% growth last quarter, and most of their revenue is very recurring revenue, which should continue to grow. For more on this I refer you to Wouter’s great post: http://discussion.fool.com/sales-growth-33108276.aspx

Picking the numbers was not all straightforward though:

Mongo had subscription revenue up 53%, but I didn’t remember how much that was of the total, so I stuck with the 49% growth in total revenue.

For Nutanix, I went with the apples-to-apples comparisons (eliminating the zero margin hardware in both sides of the comparison).

Square had Subscription and Service revenue growth of 98%, but I stuck with the overall revenue growth of 51%.

For Twilio I used the growth rate excluding-Uber of course, as that will be what future growth rates will be.

Pure, with it’s outlier “low” growth rate of 40%, was also an outlier in being by far my smallest position at just 2.5% of my portfolio. A more weighted average of the other nine would be 97.5% of my portfolio growing at 58.0%, which turns out to not make much difference.

I hope that this was of interest.

Best,

Saul

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Love it.

Now for avg gross margin and net revenue expansion! Just kidding, you do enough already. Who has time to run those?

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Of the greatest interest, and Wouter’s too.

It seems to me that very high sales growth, which we try to predict from what the company does may not fall too fast, is absolutely critical in what we do because it is the only form of safety we get. We are often choosing to buy companies on multiples of sales in the very high teens or the wrong side of 20! Therefore a growth rate which we trust will reduce the risk is the only component of safety.

Sometimes the question is raised about how long this can go on. One way of answering it (aside from macro artificial liquidity and global debt fears) is what multiple of sales ceases to be acceptable.

I love the momentum of auctions but you can get caught out. “Who will give me 25 X sales for this beautiful fast-growth microcap company? Thank you Sir! Are you still bidding Madam? You are, 26. Over there - 27. 28 anyone? Thank you Sir at the back! Surely this is cheap at 28. On the telephone at 29! Now 30 would be a very reasonable price to pay for a company growing sales at 50% would it not? Yes Madam, 30! Any advance on 30? … Thank you…”

What would you NOT pay? At what ratio to sales growth is the multiple just too high to pay?

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