High Peak Financial
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Blog

This blog is written by Austin Conner and covers a mix of business topics that interest me.

I am currently a contract CFO and have worked with companies in a number of industries.


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.

Source. Morningstar

Source. Morningstar

The correction occurred in two highest valuation quintiles while other groups remained largely unchanged.

Source: Morningstar.

Source: Morningstar.

The valuation spread between the highest and lowest valued companies remains well above historical averages.

Source: Morningstar

Source: Morningstar

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

Source: Morningstar

Source: Morningstar