| INTEGRATIVE INSIGHTS ON EMERGING OPPORTUNITIES |
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jmacdonald@firstanalysis.com
- Our SaaS universe’s average enterprise value multiple of 2024 estimated revenue was 7.0 at the end of the December quarter, up from 6.8 last quarter. For 2025 estimated revenue, the average multiple was 6.0, flat from last quarter.
- Revenue growth in 2024 was expected to be 14.4% on average, up from 13.2% last quarter. In 2025, revenue was expected to grow 13.6% on average, up from 13.0% last quarter.
- Correlations between enterprise value multiples of revenue and revenue growth rates remained at or near longer-term normal levels, but the gap between valuations for small- and mid-capitalization companies and larger-capitalization companies increased slightly as six of the largest capitalization companies gained more on average than the overall universe.
- Our SaaS universe stocks appreciated 18.9% on average in the quarter, far ahead of the S&P 500’s 2.1% gain. Merger and acquisition activity among the public companies focused on smaller names.
TABLE OF CONTENTS
Overview of our analysis
Correlation of valuations to growth relatively steady
Two new M&A transactions
SaaS stocks trounced S&P 500 in Q4
SaaS M&A: Notable transactions include WorkForce Software, LiveIntent
SaaS private placements: Notable transactions include Element451 and HuLoop Automation
Overview of our analysis
Our SaaS universe stocks gained 18.9% on average in the December quarter, significantly outperforming the 2.1% gain for the S&P 500, which continued to reach new highs. The strength was broad based, with 22 of the companies in our 93-stock universe (23.7%) gaining over 30%. Of the six largest market capitalization companies, only Shopify (SHOP) and Snowflake (SNOW) gained at that level; Shopify gained 32.7% while Snowflake bounced back 34.4% after dropping 15.0% in the September quarter. For the year, our SaaS universe gained 9.7%, trailing the S&P 500, which gained 22.9% as it benefitted from strength early in the year among the largest capitalization names.
Even with the December quarter’s strong returns, stock picking was critical, with 23 companies (24.7%) declining in the quarter. Our SaaS universe’s average enterprise value multiple of 2024 estimated revenue was 7.0 at the end of the quarter, up from 6.8 last quarter. For 2025, the average multiple was 6.0 revenue, flat from last quarter. Revenue growth in 2024 was expected by analysts to be 14.4% on average, up from 13.2% last quarter. For 2025, average revenue growth was expected to be 13.6%, up from 13.0% last quarter.