Q3 2019 Update on SaaS Public Company Valuation
Some observations on Q3 2019:
The sector average is still close to all-time highs even with the valuation pullback so it’s clear that enterprise software remains in favor among investors.
The correction occurred in two highest valuation quintiles while other groups remained largely unchanged.
The valuation spread between the highest and lowest valued companies remains well above historical averages.
Activist interest in bottom quintile names:
Starboard Value to a 7.5% stake in Box
Icahn took > 10% stake in Cloudera.
There was continued IPO activity during Q3 with the successful IPOs of Datadog and Dynatrace.
The highest valued companies have strong gross margins, high dollar based retention rates, low customer concentration/diversified customer base and, of course, strong growth