Quote:
Originally Posted by Stampede2TheCup
He’s saying it’s surprising the Athletic got a valuation as high as SaaS businesses when looking at their price to earnings ratio. The price to earnings ratio is commonly used as a metric the assess the value of businesses, in combination with the type and structure of the business. As mentioned, SaaS is an acronym for Software as a service which I presume he’s saying fetches a high price to revenue valuation. The Athletic are still burning cash, meaning they still aren’t profitable yet.
I don’t actually know what I’m talking about, I’m just parroting stuff from this guy:
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Sorry guys. I was writing fast. But ya....software businesses with subscription models have sticky revenues => once someone subscribes, they rarely cancel even in economic downturns. That is extremely valuable (more so than the old license model). So their stocks trade at very high multiples of that revenue stream rather than profit....many SaaS companies don't make profit except for the bigger older ones like adobe....and they don't care because the market has agreed that revenue is the key metric. Anyway....$550m for the athletic which generates $75m of revenues is ~7x value/revs. That's getting close to the kind of value that software companies with sticky revenues trade at. I just don't believe the athletic's subscribers are that resilient.