These results have led to believe that I should be doing some quantitative analysis on valuation. I don’t mean a traditional P/E or whatever… that valuation could be based on revenue growth, net retention rate, rule of 40, or something else. I’m having trouble determining what metrics to look at still.
I use Price to Sales to get a rough idea of relative valuations. Enterprise Value to Sales is better. Enterprise Value to Gross Profit is probably best.
But relative valuation is…relative. All other things equal, a company growing at 100%+ Yoy should of course have a higher PS ratio than a company growing half as fast. But also, all other things are never equal.
Saul does just fine basically ignoring valuation and focusing on finding the fastest horses. So I wouldn’t make too much of a study of it. But I find that it’s good to have at least a rough idea.
My math has Slack at a PS of 24 which is more than AYX (which has grown faster) at a PS of 19, but less than Okta (which has grown slower) at a PS of 32. I would classify Slack as “reasonably priced” – neither a bargain nor crazy expensive.
I hope that helps. Now I have a request of you.
This board is built on us all contributing to the discussion. And the above is good to know, but we’re not looking for bargains. We’re looking for great companies (with staying power). Like Okta which is not a bargain but which I think has a ton of staying power and even clout in the cloud world.
My request: Will you take some time and put together a post on your case for why the world needs Slack? How companies can benefit from having Slack instead of other solutions (or just email and older technologies)? How you think Slack will benefit from the WFH environment? Some companies that use it and what they say about it? Etc.
That would be helpful to the board.
Bear