Relative Valuations of our SaaS stocks

[mekong22]

We often get comments about how ZS or another company is particularly highly valued, so I spent a little time this weekend putting together a spreadsheet to try to compare them against one another based on where some of the numbers sit right now. This is far from scientific, but I think it is useful to see which stocks may not have grown into their valuations as much as others just yet.

I started with the latest quarter’s revenue (whichever quarter they last issues a 10-Q on), gross margin dollars, and revenue growth to compare against the market caps for the stocks below. I tended to focus more on the price to gross margin dollars rather than price to revenue, given that the net margin is what the company ultimately keeps and uses to fund operating expenses, capex, potential acquisitions, etc. I note that NTNX in particular has still been evolving away from their hardware, so their margin % is expected to keep growing and should lead to much higher revenue growth overall in coming quarters compared to the past year (e.g. the TWLO uber effect)

Everything is in $millions. PYQ Rev is the equivalent quarter of the prior year.

	Latest Q Rev	Latest GM$	GM%	PYQ Rev	growth		Market Cap
AYX	54	              48	89%	34	59%		 4,410 
DOCU	178	             133	75%	131	36%		 8,860 
ESTC	64	              45	70%	37	73%		 6,440 
MDB	65	              47	72%	41	59%		 5,380 
NEWR	124	             104	84%	92	35%		 6,140 
NTNX	313	             239	76%	276	13%		 9,610 
OKTA	106	              76	72%	67	58%		 9,360 
SHOP	344	             186	54%	223	54%		 19,710 
SQ	882	             353	40%	585	51%		 31,280 
TTD	119	             119	100%	79	51%		 6,840 
TWLO	169	              92	54%	101	67%		 13,190 
ZS	63	              51	81%	40	58%		 6,130 

By taking the last quarter’s revenue and annualizing it (multiply by 4), I get these price/revenue calcs:

	P/R
NTNX	 7.7 
SQ	 8.9 
NEWR	 12.4 
DOCU	 12.4 
SHOP	 14.3 
TTD	 14.4 
TWLO	 19.5 
AYX	 20.4 
MDB	 20.7 
OKTA	 22.1 
ZS	 24.3 
ESTC	 25.2 

and this is the order when I take price to gross margin $ (again annualized):

	P/Margin
NTNX	 10.1 
TTD	 14.4 
NEWR	 14.8 
DOCU	 16.7 
SQ	 22.2 
AYX	 23.0 
SHOP	 26.5 
MDB	 28.6 
ZS	 30.0 
OKTA	 30.8 
ESTC	 35.8 
TWLO	 35.8 

Naturally, the companies growing the fastest (and expected to continue to grow the fastest) would have the highest P/Margins, I was a bit suprised to see TTD so high on the list given that their growth rate is high.

So I wanted to factor in the revenue growth.

This is what it looks like when I simply divide the P/M by the growth percentage (e.g. taking Twilio’s 35.8 and dividing it by the 67% growth they had in the more recent quarter:

	P/M/Gr
TTD	 28.4 
AYX	 39.0 
NEWR	 42.4 
SQ	 43.6 
DOCU	 46.4 
SHOP	 48.8 
MDB	 48.9 
ESTC	 49.0 
ZS	 52.3 
OKTA	 52.9 
TWLO	 53.2 
NTNX	 75.0 

Two of the fastest growers, AYX and TTD show as two of the more relatively inexpensive companies on the list.

To factor in the revenue growth a different way, I projected out the margin $ for each company, for the next three years, by simply taking their revenue growth today, and deducting 5% each year (So Twilio had 67% growth in the latest quarter. I assumed 62% next year, 57% in year two, and 52% in year three). Of course, these are broad strokes/estimates, some companies won’t keep up the growth quite so high and others may actually accelerate their growth in upcoming years.

This is what the price to margin would look like three years from now using today’s price and no change in the gross margin % of the companies:

	P/M/3yrGr
TTD	 5.2 
AYX	 7.0 
NEWR	 7.6 
SQ	 8.0 
ESTC	 8.3 
DOCU	 8.4 
MDB	 8.7 
SHOP	 8.8 
NTNX	 9.1 
TWLO	 9.2 
ZS	 9.4 
OKTA	 9.5 

pretty consistent order and relative valuation across the last two calculations that factor in the expected growth (although notably NTNX is less of an outlier in scenario 2)

Speaking of NTNX, last quarter the overall growth was 13%, although as they shift away from hardware, that growth is expected to accelerate significantly. In order for them to get near management’s estimate of $3 billion of bookings in three years, they would grow at more than double their current rate, and their gross margin % would increase without the low margin hardware weighing down the overall average.

Playing with the growth % a bit for NTNX, even keeping their third year revenue around $2 billion, would give them a metric of 4.6 for the last calc above, lower (essentially saying the stock is potentially cheaper) than any of them.

Now keep in mind, this doesn’t imply that any of the stocks above are bad investments. I do think that all of them can significantly beat the market averages over the next few years, but this might provide a guide as to where new money, or potentially any allocation shift you want to do for positions that have grown uncomfortably large, could be reallocated to.

I currently have very large positions in MDB and NTNX, more or less about triple the size of my ownership of the other companies on the list. After going through the analysis above, I decided to sell a bit of my MDB (bringing it down from about an 18% position to 15% of my total portfolio) and I sold a small amount of my ZS and TWLO. So I took about 3% out of MDB (which was large) and 0.5% each out of ZS and TWLO. I added a most of those funds equally to AYX and TTD, with a small amount going into NEWR and also to NTNX (which yes, NTNX was already a pretty large position for me, but if they even get close to that $3b booking number in three years, the stock should do remarkably well imo).

I should also note that I did all of this with IRA money. If I only had these stocks in a taxable brokerage account, I would not have made any moves today simply because I think every stock on the list can do very well in future years and there were no positions that I was uncomfortable with or losing any sleep over so I prefer not to pay taxes unless I really feel I’m moving funds to where it will have significant outperformance (e.g. I finally parted ways with the last of my APPL shares last month to put more into some of the stocks above, will pay the tax and feel good about it). This is also why I didn’t trim any OKTA, despite it being last on the list above, as all of the shares I own are in a taxable account and have nearly tripled since I bought them, so I’ll let it run and not incur any income tax to pay right now.

Anyway, there are lots of things that I didn’t factor into this analysis (control of operating expense, capex, TAM, etc) to keep it simple. Most likely the stocks that do the best on the list will be the ones that have their revenue accelerate in the near future (or get acquired at a nice premium in the next year or two). I think some of them will have growth continue to accelerate, but can’t predict which ones those will be (other than NTNX), so without knowing that, this seemed like the best way to compare them against one another.

Anyway, feel free to poke holes in anything that seems wrong. I put it all together fast so might even have some typos in the original data numbers. Hopefully this is useful to anyone else thinking of shifting funds or allocating new money

-mekong

[mekong22]

Also, I should point out that I believe both AYX (wednesday) and TTD (thursday) are scheduled to release earnings this week. I know some people shy away from buying or selling just before earnings. In my mind, I’m more worried about not buying and having the stock run up after a good report than having it drop (potentially temporarily depending how things go in subsequent quarters).

It’s a bit of a gamble either way, but i did want to mention that since they are the two that I decided to add the most to today. A couple days from now I may wish I had waited, we shall see…

-mekong

[MacInTheBox]

Awesome post, but for SQ, you should use adjusted revenue, not gross revenue, since they have to fork over a good chunk of the gross revenue to Visa Master. They don’t make 1 cent out of those.

[mekong22]

Thanks Mac

Since I’m ultimately using the gross margin dollars for most of these metrics, wouldn’t the visa/master costs already be backed out via cost of sales?

If so, then I think SQ would still be apples-to-apples with the others, hence, SQ only has 40% margins above vs many of the others that are more than double that.

-mekong

[MacInTheBox]

Yes, but in a way we’d be masking Square’s core high margin growth driver, their value add service / products. (Growth in the past 6 quarters: 97% 86% 93% 98% 132% 117%, now 33% of their adjusted revenue).

Personally I prefer to remove extra steps I have to take / remember when looking at reports to make decisions, be it stocks or at work. =)

[Texmex]

TTD GM 100% is that a typo?
Your approach of P/Margin. I try to do something similar - when calculating P/S reduce Sales by a factor to account for the GM differences between companies. The issue of course is that some companies have a lot higher CAC which does not come under the gross margin calcs.

[JAFbrblev]

My only critique is that Rev Growth should be multiplied by Gross Margin to get a sense of the “manageable” cash growth a company is growing.

You can then plot EV/S versus Managemble Cash Growth to build a best fit line and determine which companies demonstrate the greatest relative value.

[mekong22]

TTD GM 100% is that a typo?

not a typo. I haven’t spent much time going through TTD’s filings in the past, but that is the way I read it.

Page 4 of their latest 10-Q here:

https://www.sec.gov/Archives/edgar/data/1671933/000156459018…

shows one line for revenue and then goes straight to operating expenses without any cost of sales or GM. I assume that is because they get a fixed percentage of the “true” gross revenue money that is brought in, which accounting rules would require them to record net. So what other companies consider gross margin, is actually gross revenue for TTD.

Assuming that’s the case, it doesn’t make any difference for my analysis. Even if I had a grossed up (cash-in) revenue number, I’d be backing out the cost of sales to get to the gross margin (which is what they’re calling “revenue” and I’d be using the same numbers in the last few metrics.

Anyone that is more familiar with their financials or accounting, feel free to clarify if I’m mistaken.

The other suggestions from Tex and JAF are good too, thanks, I might play around with those when updating in the future

-mekong

[dumaflotchie]

Anyway, feel free to poke holes in anything that seems wrong.

I do understand the main thesis you are trying to espouse…that higher growth, higher margin stocks may be better investments than lower growth, lower margin stocks at the same P/S valuation.

But you come out of the gates with arbitrary suppositions about last quarters revenue multiplied X 4 which itself hadn’t accounted for future growth nor even seasonality of whatever Quarter coincidently was chosen. You also essentially chose arbitrary time frames of present market cap with a past quarter’s revenue growth and completely imaginary total year revenue…all rather arbitrary.

When you go through this many machinations to try to show how your stocks are properly valued, that should be a warning. IMO, your analysis has so many flaws as to be meaningless and I doubt you will find any back testing of such data for predicting future stock performance.

I also think when you make Trade decisions on such machinations, one may be spending more time with spreadsheets than really understanding the investment opportunity of each stock you own and most importantly recognize that it is unwise to price anchor, P/S anchor, or anchor to another unrelated stock’s performance.

Your decision to sell MDB, TWLO, and ZS based on your analysis could have easily been discerned from the simple P/S list…without the other machinations…and as you know from reading the NPI, there is some pretty reasonable data on stock performance for P/S>20 over the subsequent 3 years.

So…that was a great deal of work IMO…for little objective, predictive or backtested value. I hope you track your progress prospectively to see just how it turned out against alternatives.

Best:
Duma

[anthonyms]

Great exercise.

Have you considered using the Like for Like growth rates for Nutanix and see what that does to the results? To be fair their LFL growth rates are much higher or to put it another way the 13% is not a fair reflection of the underlying business performance.

Again as mentioned before these valuation comparisons fail to consider the deferred revenues built up into the business which in some cases is substantial and definitely varies.

A

[mekong22]

Duma

Thanks for the constructive feedback. By no means was I looking to do an exhaustive valuation of these companies. Nor was I trying to analyze whether any of them are better or worse opportunities than non hyper growth SaaS companies. Theoretically one could argue that it doesn’t matter their relative valuations to one another if they are all significantly over or under valued. I was just trying to get a better handle on which stocks might have been bid up a bit higher than others at this point in time.

I do understand the main thesis you are trying to espouse…that higher growth, higher margin stocks may be better investments than lower growth, lower margin stocks at the same P/S valuation.

That’s not really what I was trying to do. I didn’t start with any thesis. If anything, I’d say it is a given that higher growth and margin stocks are better investments at the same price/sales. You don’t need to do an analysis to tell you that.

But you come out of the gates with arbitrary suppositions about last quarters revenue multiplied X 4 which itself hadn’t accounted for future growth nor even seasonality of whatever Quarter coincidently was chosen. You also essentially chose arbitrary time frames of present market cap with a past quarter’s revenue growth and completely imaginary total year revenue…all rather arbitrary.

I did very much intentionally ignore seasonality, yes, as I don’t believe there is a significant seasonal nature to many of the companies above that provide software as a service since companies need to pay for it, on a recurring basis, 12 months out of the year. In retrospect, a company like SQ probably processes more payments during the holiday quarter etc, so I would agree that the simplistic nature of annualizing their last Q’s revenue may not be as apples to apples as it is for most of the companies on the list.

When you go through this many machinations to try to show how your stocks are properly valued, that should be a warning. IMO, your analysis has so many flaws as to be meaningless and I doubt you will find any back testing of such data for predicting future stock performance.

How many machinations are you counting? All I’m ultimately doing is taking the price to gross margin of each company and then layering an adjustment for growth rates. It’s only two steps (although I did two different alternatives of the second step to apply growth since the first version, was admittedly very arbitrary (dividing the P/M by the growth percentage) so I wanted to see if forecasting out the next few years would get to a very different place. The two methods came out relatively close to one another, so good enough as far as I am concerned.

I did show several different steps to make it clear where everything was coming from, but at the end of the day, I’m just dividing the market cap of the company by a very high level estimate of the amount of gross margin dollars they could potentially generate three years from now and seeing which ones seem like they could be the better investment at today’s price. It wouldn’t shock me if OKTA’s outperformed all of the others on the list, despite appearing to be the most (relatively) expensive using the simple calculation above.

I also think when you make Trade decisions on such machinations, one may be spending more time with spreadsheets than really understanding the investment opportunity of each stock you own and most importantly recognize that it is unwise to price anchor, P/S anchor, or anchor to another unrelated stock’s performance.

Thanks again for the feedback/opinion. I guess you’re assuming I haven’t extensively researched these companies from a non-financial standpoint simply because I didn’t write up copious notes and factor everything into a more exhaustive analysis?

and regarding price anchoring, I would argue that what I’m doing above, by taking a simplistic, fresh look at how these companies stack up and reallocating some funds (primarily out of a company, MDB, that has run up to a very large, oversized, nearly 20% position in) is the opposite of price anchoring, some might say downright logical.

Your decision to sell MDB, TWLO, and ZS based on your analysis could have easily been discerned from the simple P/S list…without the other machinations…

To reiterate what I said in the original post, I only sold a small portion of what I owned in each of those three companies. I certainly expect and hope that each of them will greatly outperform the overall market for years to come given my remaining holdings in all three.

So you think I would have concluded to reduce those same three stocks by just looking at P/S? Doesn’t the above prove that theory wrong? Look at the “P/R” list in my first post above. By only considering P/S I would have probably been trimming ESTC if I thought P/S was the best way to compare how expensive these stocks were. Not to mention that AYX was also one of the highest P/S stocks too, and was ultimately the stock I bought the most of this morning.

and as you know from reading the NPI, there is some pretty reasonable data on stock performance for P/S>20 over the subsequent 3 years.

Now we’re cutting to the chase. Are you just saying you just think stocks with P/S over 20 are too expensive in general and we shouldn’t own any of these companies? Or at least not most of them? I’m never going to try to talk you or anyone else into allocating more of their portfolio into this type of stock than they are comfortable with.

I’m fine with you or anyone else eliminating most stocks with P/S that high from consideration for their portfolio. If you think the past history somehow proves that high P/S stocks will be bad investments, you’re likely to find most of the information on this board unhelpful to you.

So…that was a great deal of work IMO…for little objective, predictive or backtested value.

You are absolutely correct that I had little objective in doing this analysis, I never claimed to. But this was not a great deal of work, I put this together in a pretty short amount of time. It actually took longer to type it up and format the tables today so I could share it, than it did to pull up the 10-Q’s and pop the numbers into a spreadsheet and add the formulas.

and you are correct, I didn’t backtest. How could someone back test hyper-growth, nearly 100% margin, recurring revenue, companies when there have been almost none in the history of the public stock markets? Eliminating high P/S companies from investment consideration because previous high P/S companies (with much lower margins, non-recurring revenue, etc) did poorly would be like not buying Amazon in 1999 because bookstores hadn’t performed well historically.

I hope you track your progress prospectively to see just how it turned out against alternatives.

I’ll track my progress prospectively by looking down at my feet in 10 years and see if I’m either barefoot living on the beach in an early retirement or barefoot in the poor house, then I’ll know how it turned out

-mekong

[mekong22]

Great exercise.

thanks A!

Have you considered using the Like for Like growth rates for Nutanix and see what that does to the results? To be fair their LFL growth rates are much higher or to put it another way the 13% is not a fair reflection of the underlying business performance.

Yes, as you point out, I really kept this short and simple and didn’t try to break out different revenue lines. I thought about separating out true software recurring revenue from other stuff but each company gives a slightly different breakout, so I just kept it simply by only looking at whatever they called consolidated revenue and margins on the face of their income statements.

I did note in the first post that I toyed around with NTNX’s growth rates a bit, some scenarios I came up with suggested that it might be the most undervalued of the group. They’ve been saying that they expect to get to $3 billion bookings in a few years. $3 billion bookings doesn’t mean $3 billion revenue that same year, so in my head I’m thinking maybe $2.5 billion revenue if (big if) they got to $3 billion bookings. To be more conservative, I kept the percentage growth low enough that it only gets them to $2.0 billion revenue three full years from now. I forget what the exact percentage it was, but that did make NTNX look like the most undervalued compared to the others if they can get there.

Again as mentioned before these valuation comparisons fail to consider the deferred revenues built up into the business which in some cases is substantial and definitely varies.

Yes, agreed, that’s definitely a factor that a more exhaustive analysis should consider. I just tried to keep mine as simple without using many variables.

-mekong

[XMFBreakerTinker]

I tried to decide between 4 stocks in 2016. One was SHOP. Under every scenario SHOP remained overvalued by some against all other high growth high value stocks. No matter how aggressive I got w the values.

Nevertheless I went w SHOP. Shop beat them all anyways.

Valuation for growth investing is a funny thing, but mostly the metrics don’t matter. What matters is marketcap to opportunity as the valuation metric with coefficients for growth rate, strength and duration of competitive advantage, cash flow margins and the like w a floor on buy out value.

The rest is like trying to rate girls as to which girl you would like to go out with. You do the metrics but in the end you know that was a futile gesture. You just knew.

Ahhh,maybe bad sexist pig analogy but what you gonna do.

There is cheap and bubble and in-between mayhem that no SQL table can resolve to any merit.

Keep in mind Internet bubble and 3D bubble. Valuation is not irrelevant, but also, in the end, fundamentals will rule them all. 3D companies, except for 2, had little in the way of fundamentals. And yet we made money w both. The key is deciphering when the perception of economic value hits reality and then getting out of dodge.

As Saul has stated very articulately, SaaS is real and a powerful business model. The dominant such companies, w Salesforce and Amazon and Microsoft and Netflix being predominant, are monsters. TEAM may be a monster coming up. But those that dominate will be monsters. The others will grow w out gaining real economic value and will either be bought out or disappear some day.

Until a dominant company disappoints (like Nvidia -although not SaaS, or a SaaS demonstrates its lack of economic value - say a Talend) the market perception of marketcap to oppty and all the coefficients will prevail and the relative multiples are not chance but reflect different perceived growth and business fundamentals. Thus comparing x to y is apples to oranges. Just ask Paypal w Square.

Tinker

[stenlis]

Great analysis, mekong

I did one of your steps differently - adjusting for growth.

You calculated P/M/Gr for NTNX as (7.7/0.76)/0.13
I think growth is better calculated with as a positive gain, so P/M/Gr would be (7.7/0.76)/1.13

You’ll get these values from my calculation

NTNX	8.97
TTD	9.54
NEWR	10.93
DOCU	12.16
AYX	14.42
SQ	14.74
SHOP	17.20
MDB	18.08
ZS	18.99
OKTA	19.43
ESTC	20.81
TWLO	21.62

This way you’ll get price per gross margin adjusted for 1 year of growth. Or, if we project the growth one year to the future and the MC stays the same, what would the P/GM be. It’s muche easier to read this way.

Your projection for the 3 years is interesting, got the same numbers using your methodology. Just one thing to point out - you are projecting NTNX to shrink their revenue in year 3 this way, which might not be fair…

[captainccs]

A totally different way of looking at it. As Tinker mentioned, in the long run it’s fundamentals that drive the price but one never knows when fundamentals will actually kick in, the price can be crazy for a long time. I’ve taken a visual shortcut instead of the lengthy spreadsheet route. To illustrate, I just used it last week to decide what if anything to trade for SmartSheets (SMAR) which was looking very interesting. Other SaaS in my portfolio were APPN, DBX, DOCU, MDB, TEAM. MDB, for me, was the best of the lot. So I did a comparative chart starting from the DropBox (DBX) IPO date:

http://softwaretimes.com/pics/mdb-02-16-2019.gif

DBX (the blue line) is the least appreciated of the lot by the market. Why? Time to look for fundamentals. The reason I came up with is that probably DropBox, data storage, is the product of the lot that returns the least bang for the buck to customers. Based on this perception, yesterday SMAR took its place.

There are other areas where I relay very heavily on spreadsheet numbers, as in picking covered calls to sell but those numbers are very real, much less fuzzy than the numbers used to evaluate the intrinsic value of stocks. That’s my excuse!

Denny Schlesinger

PS: I use BigCharts: http://bigcharts.marketwatch.com/default.asp

[dumaflotchie]

If you think the past history somehow proves that high P/S stocks will be bad investments, you’re likely to find most of the information on this board unhelpful to you.

Mekong:

Just for clarity, many of the most successful stocks on this board were first discussed on the NPI, so this board doesn’t have some prescient powers on what stocks will be successful.

But again you have gone through some serious machinations that seem more intended to try to justify the high P/S than to prove that they will be successful in the next 3 years…confirmation bias.

I know the discussion was not welcome here the last time I brought up the expanded multiple phenomenon that was the lion’s share of the majority of your gains (and mine) over the past 2-3 years…but it is a fact.

This board was NOT clamoring around stocks with “ultrahigh” P/S last year (other than ZS)……TWLO was first purchased here at more like a P/S of 6. So surely any reasonable person can see that there is a difference between highly valued and unprecedented valued?

If you doubt what I am saying, just plug your stocks into this graph and see the expansion in P/S:

https://ycharts.com/companies/TTD/ps_ratio

ESTC and ZS were purchased at an already high P/S.

At the NPI, we could only identify around 5-6 stocks that had a P/S >20 and what the subsequent 3 year return was…sort of back testing if you will. This would be an interesting exercise for you if you have interest.

But as Tinker has said, stocks can trade very high for some period of time irrespective of logic, number crunching or sanity. So nothing about ultrahigh P/S caution is guaranteeing these stocks crash tomorrow…just that probabilities favor they underperform less valued stocks with the same revenue growth rate.

Its OK if you don’t believe me and I will not comment further so as not to clutter this board.

[mekong22]

Just for clarity, many of the most successful stocks on this board were first discussed on the NPI, so this board doesn’t have some prescient powers on what stocks will be successful.

duma

I’m not sure where you get the idea that I’ve ever suggested that this board is better or worse than NPI. Yes, I do probably read Saul’s board more thoroughly than NPI, but I think they’re both great.

I made the mistake recently of posting a few times on more political themed threads on NPI (related to Amazon and tax reform) which I later regretted getting into, but I really respect and appreciate Tinker and you and all the folks that make NPI a great resource!

I think you and I both have the same goals at the end of the day, to find the best ways to invest our money and to occasionally share our thoughts with others to contribute to this wonderful community. A few years from now you may end up being correct and I may be wrong on many of the thoughts above. Even if we don’t agree, there are different, motley, approaches to investing that can be successful, so I definitely hope that both of our portfolios do very well going forward.

-mekong

[BobbyBe]

Just to jump in with some simple math…

Twilio has a market cap of 13.8 billion. If we assume 800 million in revenue for 2018 (including sendgrid) and a 35% annualized 5 year growth rate, we get revenue at 3.587 billion at the end of 2023. Attach an 8x multiplier to that and you get a market cap of 28,697. That’s a shave under 16% annualized CAGR for five years.

So is one to be happy with that performance? It may seem unimpressive after seeing names double and triple, but it still beats the hell out of an index fund. Time the entries right and you could do even better. Not to mention the company could outperform the numbers I used in my simple calculation and/or continue to have a high multiple attached. Things could go the other way too, but I think that is less likely.

[mekong22]

Mostly out of personal curiosity, I updated the numbers for TTD in this spreadsheet to show TTD’s new most recent quarter’s revenue/gross margin, along with the updated growth percentage based on the same quarter of the prior year, and the updated market cap. Here’s how it looks now, sorted by the last column on the right:

	Latest Q R  Latest GM 	GM%    PY Q R  growth	Mkt Cap  P/R	 P/Marg	P/M/Gr	 P/M/3yrGr 
TTD	161	     161	100%	103	56%	 8,273 	 12.8 	 12.8 	 22.8 	 4.1 
AYX	54	      48	89%	34	59%	 4,410 	 20.4 	 23.0 	 39.0 	 7.0 
NEWR	124	     104	84%	92	35%	 6,140 	 12.4 	 14.8 	 42.4 	 7.6 
SQ	882	     353	40%	585	51%	 31,280   8.9 	 22.2 	 43.6 	 8.0 
ESTC	64	      45	70%	37	73%	 6,440 	 25.2 	 35.8 	 49.0 	 8.3 
DOCU	178	     133	75%	131	36%	 8,860 	 12.4 	 16.7 	 46.4 	 8.4 
MDB	65	      47	72%	41	59%	 5,380 	 20.7 	 28.6 	 48.9 	 8.7 
SHOP	344	     186	54%	223	54%	 19,710  14.3 	 26.5 	 48.8 	 8.8 
NTNX	313	     239	76%	276	13%	 9,610 	  7.7 	 10.1 	 75.0 	 9.1 
TWLO	169	      92	54%	101	67%	 13,190  19.5 	 35.8 	 53.2 	 9.2 
ZS	63	      51	81%	40	58%	 6,130 	 24.3 	 30.0 	 52.3 	 9.4 
OKTA	106	      76	72%	67	58%	 9,360 	 22.1 	 30.8 	 52.9 	 9.5 

So on the face of, despite TTD’s nearly 30% stock price rise today, it shows as significantly cheaper than it did earlier in the week.

This is definitely misleading, as duma pointed out above, as I am simply annualizing the most recent quarter and in this case, (similar to the discussion about SQ above), and TTD’s advertising is also seasonal in nature so the holiday quarter reported yesterday will typically get an big extra boost compared to other quarters. So you can’t realistically expect them to grow their revenue as much as 4x this latest quarter + 50% or so.

The best way to fix this would be to take the four trailing quarters for each company and compare them to the previous four trailing quarters. I won’t be able to pull all of that together right away, (but I bet if we did, TTD might still be near the top of this list, e.g. lease expensive looking to me, maybe in the high 5.x or low to mid 6.x’s, certainly not 4.1 and so much lower than the others) but I thought it was interesting enough to share after the big jump today.

As several people pointed out above, there are shortcomings to doing any simplistic analysis like this, but I’m glad it was president’s day last weekend and I got to do the initial calcs because I increased my TTD holdings pretty significantly on Tuesday (and added more on Wednesady with the analyst downgrade gift price).

With today’s run-up, I think I will treat myself to an extra cocktail this evening

-mekong