Here's What Separates the 9 Public SaaS Companies that Trade Above 10x

Speaker A: Why do nine public software companies trade, integrate multiple and the rest are in the valuation doghouse? Well, let's find out in today's edition of SAS Metric School. Welcome. My name is Ben Murray. So Miratech produces this great report covering public software comps and this is from the June 2026 report. They cover I think about 100 companies in there. And the gap is widening between these top tier valuation companies and the rest. The middle's getting crushed, but the top is doing better than ever. So let's level set from this latest report. Median air multiple today 3.2x. That's 64% below. Unfortunately those preserve medians of 8.7x and again preserve zero interest rate policies. So of course after the SAS crash, the top 10 median, the top 10 in their report have a median multiple of 19.2x. So that's 15% above the SAS crash, you could say. So we've got a lot of companies in that valuation doghouse, but the ones at the top are now doing better than the SaaS crash. So this is really interesting. So what's going on here? So only nine companies trade above that 10x revenue multiple. 77 trade below 5x. So we've got a very different market here between those top tier companies. Only the 10% of the best of the 100 and the rest of us. So now we get into the rule of 40 and this is really interesting. So growth beats profit by 3.3x. So Ameritech ran a regression on this of course, and revenue growth is 3.3x more correlated with the multiple than free cash flow margin. So we think about Rule 40 growth plus EBITDA margin for private companies, free cash flow margin for public companies. And it swung to the side of growth being more heavily weighted in that rule of 40 calculation driving these multiples. So translating that 1% more growth moves the multiple as much as 3.3% more in free cash flow margin. So we're heavily, we're weighted over to the growth side of the rule of 40 and uh, looking at the rule of 40, the growth built company trades at 7.3x versus the margin built at 3.7. So heavier, heavily heavier weighted towards growth 7.3. If it's more weighted towards margin, good margins pushing rule of 40 up 3.7. So same rule of 40 but very different multiples. So what separates these companies like those top 10, the top nine and what we're seeing here in this report is we've got free cash flow margins above 20% and AR growth above 20% which at the those scales very hard to do. So they're getting both profit and growth. So the market's not paying just for growth and it's not paying just for profit. Uh, it's paying for the company that refuses to choose right. We want the best of both worlds to get that higher valuation. And also this is interesting. The market now sorts software by AI exposure and I've talked about this on other podcasts and in my blog content that AI winners get the premium. So we see these public companies tagging AI ARR and showing those growth rates versus their legacy SaaS revenue. So we've got to show that AI attribution to show to prove that AI is re accelerating our ah business. If not you'll get punished in that horizontal SaaS the hardest. So the doghouse, the valuation doghouse is mostly that AI risk story contributing to it. So really interesting. So now looking at those companies, we've got companies above 30% growth and free cash flow margins above 30% for months. That was only Palantir and App11. Now we've got Hinge health in there as well. So those are obviously fantastic numbers. So this is a great report to digest. Again, MarTech's June 20th 26th Pulse report just going through some of those high level numbers and how those top companies are rewarded for just having a great rule of 40. Very balanced. But also now we can see growth being overweighted as far as valuation in the Rule of 40 calculation. So hope you enjoyed today's edition of SAS Metric School. Thanks.