Hi Fools,
I wanted to share a table that I put together that consists of data taken from a newsletter released by Jamin Ball today (https://cloudedjudgement.substack.com/p/clouded-judgement-31…).
I picked out some of the most popular company names on this board and ones that are less mentioned, but seemed promising based on their relative valuations and other metrics. All of the companies that I included have at least a 30% projected revenue growth for next year, which is his criteria for “high growth” companies (NTM = Next Twelve Months). I figured it would be best to filter his list to include only the companies we are most focused on (i.e., higher growth) because I think it’s interesting to examine how these companies stack up against each other on various metrics. Note, the first three columns after EV are EV/revenue multiples.
Also, for the “Rule of 40” column, here’s an explanation taken from a Motley Fool article by TMFSaintCroix (https://www.fool.com/investing/2019/09/25/introducing-the-ru…
“You take the annual revenue growth of a company as a percentage (say, 50% revenue growth) and add that to the company’s profit margin (for instance, 10%). In this example, the hypothetical company would have a Rule of 40 score of 60, which is outstanding. A score of above 40 is considered a passing grade, while a score below 40 means the company fails the Rule of 40 test.”
` **[EV/Revenue Multiples]** **[RevenueGrowth%]** `
`**EV TTM NTM 2022 TTM NTM GrossMgn% FCFMgn% Ruleof40(%)**`
`Snowflake 64B 108x 58x 36x 124 85 60 -28 96`
`Crowdstrike 45B 59x 40x 28x 86 48 73 33 119`
`Cloudflare 23B 54x 39x 30x 50 37 77 -17 33`
`Datadog 26B 42x 31x 23x 66 38 78 17 84`
`ZScaler 25B 47x 34x 26x 49 38 77 17 65`
`Twilio 61B 35x 25x 19x 55 38 52 -2 54`
`Zoom 99B 38x 26x 22x 326 42 70 53 379`
`Docusign 42B 33x 24x 17x 44 37 75 14 59`
`Okta 31B 37x 28x 22x 43 30 74 14 56`
`Palantir 47B 43x 32x 25x 47 35 68 -28 19`
`Fastly 9B 29x 23x 18x 45 31 59 -17 28`
`JFrog 4B 26x 20x 15x 44 33 81 17 61`
`HubSpot 22B 25x 19x 15x 31 32 81 11 42`
A few cursory observations…
** Fastly and Palantir’s Rule of 40 numbers do not meet the minimum standard percentage, which potentially makes them less appealing overall
** Cloudflare also does not meet the minimum Rule of 40 criteria, which was quite surprising since this is one of my highest conviction holdings
** The strength of the across-the-board metrics for Crowdstrike and Datadog relative to the other companies makes me more bullish, although their EV/revenue numbers are among the highest
** Datadog may become my highest conviction company if they outperform their NTM estimates
** ZScaler also looks very strong, though I’m not as familiar with this company because I do not own shares (would love to hear insights from ZScaler bulls/bears)
** Zoom’s numbers are very impressive, but I just don’t know what will happen with this company post-pandemic and their guidance is weak relative to their unbelievably explosive growth during the past year. This is a tricky one for me because they may continue to surprise and handily outperform expectations by becoming an integral part of our world.
** Docusign looks like a really good value relative to the other companies.
** I don’t know much about JFrog, but the metrics peaked my interest and I may start researching this company a bit more. Again, I would appreciate any insights about this company from fellow Fools.
I’d be interested to hear any feedback on this table and if you all agree or disagree with my preliminary observations. I am open to learning from this community because, despite my best efforts, I know I may have missed something. Any thoughts?
- Ceez
P.S. I need some guidance on how to efficiently make/share tables on these discussion boards. It’s my first time doing this and there has to be a better way! LOL!