Number of Hyper Growth Stocks

The number of stocks with 50% sales growth is close to the long-term average: about 200 stocks. There were more high-growth stocks (around 500) from 1995 to 2000.

step0 to step5: liquidity
step6: [Sales - TTM Q1] > 1.5 * [Sales - TTM Q5]
step7: [Sales - TTM Q2] > 1.5 * [Sales - TTM Q6]
step8: [Sales - TTM Q3] > 1.5 * [Sales - TTM Q7]
step9: [Sales - TTM Q4] > 1.5 * [Sales - TTM Q8]
step10: [Sales - TTM Q5] > 1.5 * [Sales - TTM Q9]
step11: [Sales - TTM Q6] > 1.5 * [Sales - TTM Q10]
step12: [Sales - TTM Q7] > 1.5 * [Sales - TTM Q11]
step13: [Sales - TTM Q8] > 1.5 * [Sales - TTM Q12]

count of stocks passing step

  Date    step5  step6  step7  step8  step9  step10  step11  step12  step13  pct_step6
  Avg:    1982    204    165    131     99     72      55      41      30       10%
19871231  1729    193    152    115     85     59      49      33      20       11%
19881230  2004    238    206    174    137     93      76      65      44       12%
19891229  1958    170    150    125     96     77      67      60      47        9%
19901231  1930    144    118    100     72     52      47      42      35        7%
19911231  2007    158    125    102     84     53      44      32      24        8%
19921231  2016    182    141    112     89     59      48      33      28        9%
19931231  2259    241    195    151    113     71      52      38      29       11%
19941230  2477    282    233    183    142     95      78      60      44       11%
19951229  2573    451    382    304    200     151     123     95      67       18%
19961231  2621    418    334    259    205     144     115     93      57       16%
19971231  2714    476    364    305    262     175     135     107     83       18%
19981231  2637    438    377    330    271     196     131     112     89       17%
19991231  2479    362    314    267    219     176     150     130     93       15%
20001229  2394    551    454    350    267     170     137     107     85       23%
20011231  2331    307    283    259    218     157     122     88      62       13%
20021231  2252    132    112     85     67     51      46      41      38        6%
20031231  2155    170    134    100     72     43      35      26      20        8%
20041231  2036    214    160    119     90     58      40      31      26       11%
20051230  1999    249    203    154    125     59      46      30      24       12%
20061229  1992    285    243    189    156     73      53      38      33       14%
20071231  1877    155    127    100     81     45      35      30      26        8%
20081231  1889    133    100     68     52     33      27      21      15        7%
20091231  1846     55     39     33     24     17      14      12      11        3%
20101231  1720    138     85     43     29     13      9       8       5         8%
20111230  1677    109     85     65     48     28      15      12      8         6%
20121231  1616     65     56     41     32     23      14      8       4         4%
20131231  1578     86     63     50     43     30      27      18      16        5%
20141231  1613    111     82     62     46     33      24      19      16        7%
20151231  1613     94     73     59     46     30      24      17      14        6%
20161230  1610     67     55     40     28     19      13      11      8         4%
20171229  1549     86     64     53     33     21      18      8       5         6%
20181231  1559    112     91     68     51     34      20      15      12        7%
20191231  1522     74     60     47     35     18      14      8       6         5%
20201231  1557     93     67     53     37     23      18      12      10        6%
20211231  1600    200    137     95     65     40      28      22      18       13%
20220121  1601    200    137     94     64     40      28      22      17       12%

https://gtr1.net/2013/?~HyperSalesGrowth::styp.a:et11:dspo%2…

“There’s no SaaS model back in 2000. There’s no companies growing revenue 50% per year consistently.”
https://discussion.fool.com/quotmy-question-is-why-not-take-this…

13 Likes

The number of stocks with 50% sales growth is close to the long-term average: about 200 stocks.
There were more high-growth stocks (around 500) from 1995 to 2000.

Very nice test.
The counts are interesting.

But the CAGR is also interesting–it’s negative.
A zero-friction monthly hold equally weighted portfolio of all stocks growing that fast returned -1%/year in the last 34.9 years.
Only 11 of those calendar years had positive double digit returns.
And most of the reason the result was even that good was the recent stretch.
CAGR 21% from start of 2017, but CAGR -4.5% in the decades up to then.

Growth is worth a real premium, but on average people overpay for it.
Often the market will pay two or three times as much for something that’s ultimately worth only 50% more.
But they only pay that price for a while.

It’s absolutely true that you can make a lot of money very quickly in these securities.
But you really have to pick your moment…or be extremely good at beating the crowd in those names.

Jim

21 Likes

As I understand it, the hypergrowth percentage criterion is only 1 dimension of stocks favored on Saul’s board. The most important criterion seems to be that the revenue be from be annually recurring subscription sales.

BLancaster

4 Likes

BLancaster said:

The most important criterion seems to be that the revenue be from be annually recurring subscription sales.

Except for when it’s not the most important criterion. See, for example, UPST and SNOW – UPST only gets revenue when loans are originated; SNOW has some contracted revenues but, the majority is purely “usage based”.

1 Like

As I understand it, the hypergrowth percentage criterion is only 1 dimension of stocks favored on Saul’s board. The most important criterion seems to be that the revenue be from be annually recurring subscription sales.

No.
THE main criterion for them is hypergrowth.
AFTER that the beauty of recurring subscription is their reason for being interested in SaaS companies.

They would not look for even a moment closer at companies that are NOT hypergrowers, to find out whether their revenues are coming from reliable recurring subscriptions, because those companies already miss their main criterion.

6 Likes

As I understand it, the hypergrowth percentage criterion is only 1 dimension of stocks favored on Saul’s board. The most important criterion seems to be that the revenue be from be annually recurring subscription sales.

Yes, Saul has several selection criteria, including:
40% revenue growth or more
positive and growing Free Cash Flow (FCF).
high gross margins.
rapidly improving metrics like rapidly dropping losses as a percent of revenue or increasing profits, increasing gross margins, rapid customer acquisition, improving cash flow, dropping operating expenses as a percent of revenue.

13 Likes