Hey there, thanks for the great write-up. Quick clarification question, it seems like your target price is based on 6.5x EV / Sales target multiple on group sales forecasted in the future. Wouldn't that be an overstatement of your core thesis (pure-play saas) since your group sales forecast assume government segment which would also imply a sale valuation of 6.5x on government division?
Hi and apologies for my late response. I agree w/ your thinking, but I decided to include gov sales to make my numbers comparable to consensus ests and to be consistent with my definition of the Rule of 40 (i.e., total sales growth, assuming 0% gov growth, plus total EBITDA margin). Regardless, my main point is that sales are so positively uncertain that I wouldn't mind using a +/- 2x multiple, as long as I take that uncertainty into account later in the process.
Ok thanks for the explanation. And by accounting later in the process you mean just the qualitative judgement of the overall business as a long position?
Hey there, thanks for the great write-up. Quick clarification question, it seems like your target price is based on 6.5x EV / Sales target multiple on group sales forecasted in the future. Wouldn't that be an overstatement of your core thesis (pure-play saas) since your group sales forecast assume government segment which would also imply a sale valuation of 6.5x on government division?
Hi and apologies for my late response. I agree w/ your thinking, but I decided to include gov sales to make my numbers comparable to consensus ests and to be consistent with my definition of the Rule of 40 (i.e., total sales growth, assuming 0% gov growth, plus total EBITDA margin). Regardless, my main point is that sales are so positively uncertain that I wouldn't mind using a +/- 2x multiple, as long as I take that uncertainty into account later in the process.
Ok thanks for the explanation. And by accounting later in the process you mean just the qualitative judgement of the overall business as a long position?