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SaaS Valuation Update January 2010

This is another installment of our periodic analysis of public SaaS company valuation trends.  The data is sourced from the excellent data collection and analysis provider by the Software Equity Group – check out their complete set of free research reports here.

Some interesting takeaways from the data:

  • Out of 24 software categories, pure play SaaS companies are the third most valuable from an Enterprise Value/Revenue multiple, second most valuable from an EV/EBITDA multiple perspective.
  • The pure play SaaS category had the strongest year over year revenue growth of any software category
  • SaaS companies have posted a median 73% year over year stock market return.  Almost half of the companies have posted >100% return and three firms have posted >20% return
  • There is significant variation in valuation metrics amongst the pure play SaaS companies – ranging from a high a 7.2X EV/TTM Revenue multiple to a low of 0.2x EV/Revenue
  • SaaS firms are generally EBITDA profitable, with an average EBITDA % of 8.2%.  About a quarter of the companies have negative EBITDA margins. 
  • Gross profit margins are lower than traditional license software firms, with a median gross margin of 68%
  • Surprisingly, high ttm revenue growth rates do not correlate to high valuations or high year over year stock market returns.

Click through the following presentation to get a detailed look at the data and trends.

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