Module II· Multiples & Sector SpecificsIntermediate
Question
How do you apply EV/Revenue in SaaS valuations?
Answer
Mechanics
EV/Revenue for SaaS varies strongly with growth.
Multiple range (normalized market)
```
30%+ growth: 8–12x EV/Revenue
20–30% growth: 5–8x
10–20% growth: 3–5x
<10% growth: 2–3x
```
Multiple drivers
- Top-line growth: the primary driver.
- NRR (net revenue retention): above 120%, a premium multiple.
- Gross margin: above 75% is premium.
- Rule of 40: above 40, a premium.
Regional note
listed software companies in some markets typically trade around 30% below their US peers because of market structure.
Deep diveShow more details
Pitch tip
'The target is growing 25% with an 80% gross margin and 115% NRR — we use 6.5x EV/Revenue, slightly above the sector median of 6.0x for the quality premium.'