SEG-Internet Index Search

SEG’s Monthly Flash Reports track the financial performance and valuations of approximately 300 software companies, categorized in nearly 30 product categories across the on-premise software, SaaS and Internet sectors.  This post highlights the performance of the SEG-Internet Index Search product category as shown in the SEG December Monthly Flash Report.  To view the performance of dozens of other product categories, download the latest complimentary Monthly Flash Report here: http://www.softwareequity.com/research_flash_reports.aspx

In the month of December, the Search category achieved a median EV/Revenue multiple of 1.1x, TTM Revenue Growth of 27.7%, and EBITDA Margin of 11.8%. Notable companies outperforming their respective category include:

  1. Baidu.com Inc. with a 22.7x revenue multiple.
  2. Baidu.com Inc. with an 85.5% revenue growth.
  3. On a TTM EBITDA Margin basis, Baidu.com Inc. and Yandex outperformed the category with a margin of 56.7% and 44.4%, respectively.

Public Software/SaaS/Internet Company Market Valuations

The following article is from Software Equity Group’s 2011 Q3 Software Equity Industry Report.  A complimentary copy of the quarterly report can be downloaded here: http://www.softwareequity.com/research_reports.aspx

The median market valuations of public companies comprising the SEG Software, SaaS and Internet indices, measured as a multiple of EV/Revenue, were 2.1x, 4.8x and 2.6x, respectively, at the close of the third quarter (Figure 4).  Although these Q3 median EV/Revenue multiples declined across the board from Q2, they were still markedly higher than from a year ago.

Bucking the lower market valuation trend were ten public software, SaaS and Internet companies that closed 3Q11 with stellar EV/Revenue multiples of 12.2x or higher, primarily because investors clearly resonated with their stellar median revenue growth rate of 67% (Figure 5).

Baidu, known as “China’s Google”, once again led the pack with a median 3Q11 market valuation of 29.9x EV/Revenue.  Baidu reported year-over-year revenue growth of 83.7% (which is extraordinary, considering revenue exceeds $1B), and a remarkable EBITDA margin of 56.9%.  Baidu narrowly beat out Qihoo, a Chinese provider of online security that went public in 2011, for top market valuation honors.  All told, five of the ten EV/Revenue high flyers are headquartered in China, demonstrating continued investor enthusiasm for the mammoth Chinese domestic market, despite lingering concerns about inflation and slowed growth