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56% increase in valuation with multiples of listed companies in the Software Applications Sector

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BY : Samuel Regato12/03/2021

Principal Variables Analysis

Revenue growth

Despite the current situation of the Covid-19, most of the listed companies have continued with a double-digit increase. For instance, the average has reached 20% and the median 19%. Furthermore, more than 60% has grown above 15%.

56% increase in valuation with multiples of listed companies in the Software Applications Sector
56% increase in valuation with multiples of listed companies in the Software Applications Sector

56% increase in valuation with multiples of listed companies in the Software Applications Sector

According to the Top Revenue Growth, Cloudera is the one which shows the largest increase, 70%. Cloudera, is a US-based software company that provides a software platform for data engineering, data warehousing, machine learning and analytics that runs in the cloud or on-premises.

Profit

The gross margin exposes a general high level reaching an average of 70%. However, most of the EBITDA margins (>50% of the companies) are negative with an average of -1% and median of -5% 

56% increase in valuation with multiples of listed companies in the Software Applications Sector
56% increase in valuation with multiples of listed companies in the Software Applications Sector

56% increase in valuation with multiples of listed companies in the Software Applications Sector

Regarding the Top EBITDA Margin, AppFolio is the one which shows the largest increase, 73%. AppFolio provides web-based property management software for residential property managers to market, manage and grow their businesses.

Valuation with multiples analysis

EV/ revenue vs. EV/EBITDA

Generally, the EV/EBITDA multiple is usually more meaningful than the EV/revenue multiple because it shows less dispersion. In this case, EV/EBITDA cannot be used as a benchmark given that more than 50% of companies have a negative EBITDA. The EV/Revenue multiple is extremely high, with an average of 14 times and a median of 13 times.

56% increase in valuation with multiples of listed companies in the Software Applications Sector
56% increase in valuation with multiples of listed companies in the Software Applications Sector

56% increase in valuation with multiples of listed companies in the Software Applications Sector

According to the Top EV/Rev multiple, Appian is the one which shows the higher multiple, 52. Appian is a low-code automation platform for building enterprise software applications, faster. With Appian, you get the speed of low-code development with the power of intelligent automation in one trusted and unified cloud platform.

Valuation with multiples Annual Evolution 2020 vs 2019

As we can observe in the graph, the multiples have increased during the last year on an incredible rate, the average has increased a 56% while the maximum has reached a difference of 116%. There is no big difference among the lowest values.

Regarding the median, it has increased over 48% and the revenue growth has stabilised in its highest and lowest values. However, the median and the average growth has suffered a notable decrease

56% increase in valuation with multiples of listed companies in the Software Applications Sector
56% increase in valuation with multiples of listed companies in the Software Applications Sector

Final Conclusions

REVENUE GROWTH: The average growth has experienced a notable decrease from on year to the other possibly (31% ->19% on average) due to the current situation the market is experiencing but the companies are still increasing at very healthy rates.

PROFIT: Most of the companies expose a high gross margin (69%) but EBITDA margins  show negative values in more than the 50% of the companies analysed, leading to hypothesis of the race of these companies to consolidate their market share combining high growth with negative margins. 

EV/ REVENUE vs EV/ EBITDA: The Ev to revenue multiples show extremely high values (52x). The Ev to Ebitda multiples are not consistent due to the general negative EBITDA.

EV to REVENUE EVOLUTION: The multiples average has increased considerably from 9,2 up to 14,2 as well as the median from 8,8 to 13,1.

DESPITE THE MARKET IS INCREASING AT LOWER RATES, MULTIPLIERS ARE RISING

Listed companies Analysis

Data for the analysis

These are the valuations with multiples of some listed companies from the Software Applications sector
56% increase in valuation with multiples of listed companies in the Software Applications Sector
56% increase in valuation with multiples of listed companies in the Software Applications Sector

Source: Gurufocus 21/02/23

Note:  Multiples below 0.0 and above 75.0 have been considered Not Material and not taken into account the statistics exposed of EV/EBITDA are just indicative

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