Hello Fools,
I’m revisiting the Oomph factor that was brought to the board awhile back I believe by Ron (rdutt).
The goal of this post is to share with you some interesting stats when using the Oomph factor over a large basket of stocks. EV/Sales/Oomph (EVSO)
I don’t want to debate the strengths or weaknesses of the factor. I feel the Oomph can be used as a reference point when comparing companies. It’s simple and clean. It’s just one tool out of many that an investor can use. It’s not a magic bullet and it’s not meant to solely base your investing decisions on. Keep in mind this is just a snapshot in time as these figures are constantly changing. Here was the method to my madness.
I took a diverse basket of 46 stocks and applied these parameters to the sample.
• A range of large caps like McDonalds/JNJ, midsized ISRG/WDAY, small BEAT/GPRO
• A range of great companies like Mastercard/TTD and poor ones like Macy’s/Fitbit. There are
companies on this list I would never invest in but I wanted to see how their Oomph factors
compared. The good vs. bad. Let me stress I included BAD COMPANIES on this list.
High growth vs slow
• High margins vs low
• SaaS vs Non-SaaS
• Various sectors like healthcare, software, consumer discretionary/food, media, fintech. Most of
the companies on the list have a “techie” vibe to them even though they might not be pure
software companies. Think of names like Carvana, DexCom, and 2U.
• I added a recurring revenue parameter similar to Saul’s based on a scale of 1 to 20. For
example, if a company like ZS has all recurring revenue they received a 1.2 ranking. On the
other hand, a company without recurring revenue received a 1. TTD, CVNA, etc.
Findings on overall basket of stocks:
Average growth rate 35%
Average gross margins 61%
Average EVSO 10.02
Average YTD returns 43.3%
Findings on Non-SaaS vs Saas:
Average growth rate 29% vs SaaS of 46%
Average gross margins 54% vs Saas of 71%
Average EVSO 9.53 vs SaaS 10.86
Average return YTD 30% vs SaaS 65%
To put things into perspective here are some eye-opening examples of SaaS vs. Non-SaaS EVSO’s.
MongoDB vs. Domino’s Pizza: EVSO of 10 vs 10.5. Returns 113% vs 18%.
OKTA vs. Mastercard: EVSO of 14.1 vs 14.6. Returns 101% vs 40%.
ZS vs Monster Beverage: EVSO of 11 vs 12. Returns of 90% vs 35%.
Now you’re thinking how in the world can you compare SaaS to an energy drink! You must have lost your mind!
Let’s try a few examples within the SaaS segment just to check my sanity. Companies like VEEV, COUP, TEAM all have higher EVSO’s than the two poster child’s of “expensive” stocks. ZS and OKTA.
ZS vs VEEV: EVSO of 12 vs 17.9. Returns of 90% vs 85%.
ZS vs COUP: EVSO of 12 vs 15.7. Returns of 90% vs 94%.
ZS vs TEAM: EVSO of 12 vs 14.6. Returns of 90% vs 48%.
The stocks with the highest EVSO’s produced returns of 71.6% YTD. Avg EVSO of 18.9. 4 of the top 10 have some form of recurring revenue. These high-priced companies include VEEV, COUP, TEAM. OKTA rounds out the top 10. Look at Beyond Meat! EV/S 51.6. EVSO 41.4.
There seems to be a “sweet” spot between an EVSO of 10 and 7. These stocks returned 57.6% YTD. Avg EVSO of 8.6. 9 of 12 have some form of recurring revenue. Companies within this batch have a reasonable EVSO with room for future expansion. This includes TWLO, TTD, PAYC, AYX.
Stocks with the lowest EVSO’s are truly laggards and cheap for a reason. Returns of 6.1%. Avg EVSO of 4.2. DOCU and TWOU fall into this basket of the bottom 15 stocks. Are you paying for great value or under performance?
My objective was to provide some context and perspective by looking at a diverse basket of stocks across different sectors. I may have gotten a little carried away with all of the stats I posted but I hope this information will be helpful or at least interesting to some when looking at the Oomph factor.
Stock Growth Gross M Rec. Revenue Oomph Factor EV/Sales EVS/Oomph YTD Returns
BYND 215% 27% 1 1.25 51.6 41.4 156.0%
SNAP 39% 32% 1 0.62 13.5 21.9 140.0%
VEEV 25% 72% 1.162 1.31 23.5 17.9 85.0%
V 10% 81% 1 0.98 16.6 16.9 28.0%
MCD -4% 52% 1 0.56 9.4 16.6 17.0%
COUP 39% 68% 1.18 1.55 24.3 15.7 94.0%
ISRG 15% 70% 1 0.93 13.7 14.7 7.0%
TEAM 38% 81% 1.108 1.71 25.0 14.6 48.0%
MA 9% 97% 1 1.15 16.8 14.6 40.0%
OKTA 50% 76% 1.186 2.03 28.6 14.1 101.0%
CMG 14% 20% 1 0.26 3.6 13.9 60.0%
PYPL 12% 45% 1 0.56 7.6 13.5 33.0%
NFLX 22% 37% 1.2 0.66 8.8 13.3 35.0%
ZM 103% 82% 1.2 4.05 50.0 12.3 83.0%
ZS 65% 80% 1.2 2.61 31.4 12.0 90.0%
MNST 10% 60% 1 0.73 8.0 11.0 35.0%
DIS 3% 44% 1 0.47 4.9 10.6 27.0%
DPZ 6% 37% 1.036 0.43 4.6 10.5 18.0%
MDB 78% 68% 1.186 2.56 25.6 10.0 113.0%
MTCH 15% 76% 1.16 1.17 11.5 9.8 68.0%
AMZN 17% 27% 1.042 0.39 3.7 9.6 17.0%
TWLO 81% 53% 1.14 1.98 19.0 9.6 66.0%
WDAY 35% 70% 1.17 1.49 14.3 9.6 32.0%
SMAR 55% 81% 1.178 2.29 19.9 8.7 88.0%
TTD 56% 78% 1 1.90 16.2 8.5 111.0%
PAYC 30% 84% 1.196 1.70 14.3 8.4 86.0%
ADBE 25% 86% 1.18 1.59 13.1 8.2 24.0%
TWTR 18% 68% 1.028 0.97 7.8 8.0 32.0%
CVNA 100% 10% 1 0.44 3.4 7.8 96.0%
AYX 51% 89% 1.192 2.42 18.8 7.8 63.0%
JNJ 1% 66% 1 0.67 4.7 7.0 8.5%
WIX 27% 77% 1.14 1.42 9.8 6.9 60.0%
DXCM 52% 60% 1.06 1.47 9.5 6.5 9.4%
DOCU 37% 76% 1.188 1.69 9.9 5.9 18.0%
BEAT 10% 63% 1 0.76 4.3 5.7 -18.0%
GRUB 39% 44% 1 0.85 4.6 5.4 -14.0%
ULTA 10% 36% 1 0.44 2.3 5.2 36.0%
IRTC 54% 75% 1 1.78 9.3 5.2 5.4%
LULU 26% 57% 1 0.90 4.4 4.9 40.0%
EL 11% 78% 1 0.96 4.2 4.4 34.0%
BMY 14% 69% 1 0.90 2.8 3.2 -11.0%
TWOU 32% 78% 1 1.36 3.9 2.8 -29.0%
GPRO 20% 33% 1 0.48 0.9 2.0 34.0%
GOOS 50% 64% 1 1.44 2.3 1.6 -22.0%
M 1% 39% 1 0.39 0.6 1.5 -34.0%
FIT 10% 33% 1 0.40 0.5 1.1 -17.0%