Today’s Public Software Valuation and Financial Performance: The SEG Internet Index – Social Product Category

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 – Social product category as shown in the SEG September 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 August, the Social product category achieved a median EV/Revenue multiple of 13.7x, TTM Revenue Growth of 63.7%, and EBITDA Margin of 10.6%.  Notable companies outperforming their respective category include:

  • Twitter, Inc. with a 29.0x EV/Revenue multiple
  • YY, Inc. with a 113.7% revenue growth
  • Facebook with a 54.2% EBITDA margin

SEG Software Index – Social, Internet, Social, Public, Valuations, Financial Performance, Facebook, LinkedIn, Maril.ru Group, Renren Inc., Twitter, Yelp Inc., YY Inc.

SEG-Internet Index Services

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 Services 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 Services category achieved a median EV/Revenue multiple of 3.5x, TTM Revenue Growth of 23.5%, and EBITDA Margin of 17.2%. Notable companies outperforming their respective category include:

  1. On an EV/Revenue multiple basis, LinkedIn and Qihoo outperformed the category with multiples of 13.9x and 12.6x, respectively.
  2. On a TTM Revenue Growth basis, LinkedIn and Qihoo outperformed the category with a revenue growth of 161.9% and 117.3%, respectively.
  3. On a TTM EBITDA Margin basis, Ancestry.com, FriendFinder,  and Archipelago Learning Inc. outperformed the category with a margin of 33.5%, 30.5%, and 29.6%, respectively.

Public Software/SaaS/Internet Company Stock Performance

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 major U.S. exchanges and the median stock price performance of public companies comprising our Software, SaaS and Internet Indices all finished lower at the close of Q3 2011.  A U.S. credit rating downgrade and European debt fears proved too much for investors, who eventually opted for capital preservation over upside potential. It was a jolting ride. In August and September, the Dow industrials changed by more than 1% on 29 days, and more than 2% on 15 days.  The volatility was reminiscent of the market’s extreme volatility in Q4 2008.

By the close of the third quarter, the Dow, S&P 500 and NASDAQ were down 5.7%, 10.0% and 9.0%, respectively, from the first trading day of 2011 (Figure 2).  During the same period, the SEG Software, SEG SaaS and SEG Internet indices were down 9.5%, 17.9% and 20.5% respectively.  The dramatic decline of public Software, SaaS and Internet company stock prices reflects an investor selloff of relatively risky technology stocks and a flight to Treasurys.  Across all three SEG tracking indices, 197 (71%) of the 278 public companies comprising our indices reported lower year-to-date (YTD) stock prices, far greater than the 99 companies (35.6%) that saw their stock prices decline by the close of 2Q11.  Still, ten outstanding software companies managed to achieve YTD stock market returns on September 30 that exceeded the first trading day 2011 closing price by more than 45% (Figure 3).  Included in the group is Internet high flyer, LinkedIn, which posted a 74% YTD return over its first day closing price in May of this year.