Ticker Mkt Cap TTM Rev (in millions) MDB 4.3 B 216 WIX 4.4 B 558 AYX 3.8 B 182 NEWR 4.7 B 413 TWLO 9.9 B 561 PAYC 7.6 B 530 ZS 4.9 B 214 ESTC 5.3 B 212 SHOP 15.9 B 952 TDOC 3.8 B 372 SQ 30.5 B 1,405 OKTA 7.3 B 362
We throw around the PS ratio a lot, but what it doesn’t give you is the size of the numerator (Mkt Cap or “Price”) or the denominator (TTM Rev or “Sales”). I could look at this table all day, but here are the things that jump out.
SHOP and SQ dwarf the rest in both revenue and market cap. It might be harder for these two to double revenue in the next couple years than it was in the last couple.
Other than SHOP and SQ, there are 3 companies with revenue over 500m, TWLO, WIX, and PAYC. TWLO is growing by far the fastest and its valuation seems in line with what I would expect. PAYC is growing slower, but is very profitable and its valuation also makes sense. WIX seems undervalued to me…I feel it should be close to PAYC. Just seems to make sense – more revenue, growing a little faster, a little behind in profitability.
ZS, ESTC, MDB, and AYX all have around 200m of revenue. They’re probably separated by a quarter or two of growth. These little powerhouses are also all growing revenue amazingly fast – at rates around 60% or even higher! When I think about it that way it makes me love AYX because it’s the smallest, and the most profitable. But I also love MDB – arguably the best bet to grow the fastest over the next couple years. Still, ZS’s growth is actually accelerating! And ESTC’s might be slowing a bit, but it was the fastest grower of the 4 to begin with. It’s the one I’ll be watching the closest, as it’s also the most expensive.
Lastly, NEWR looks like a real bargain, despite growing slower than some, because the profit engine is in gear.
Anyway, I just find it really useful to look at these two numbers and think about all that goes into them and what it might mean for the future. This probably isn’t the best post to get the discussion started on any of these companies, but I thought it was really interesting.