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I have been playing with Volfan's proposed metric of R40 divided by the forward 2019 EV/S ratio. I through in a couple of the larger cloud companies to see where they fit in as well. Here's what I found

Wix: 9.28
TTD: 8.86
MSFT: 8.58
TWLO: 6.73
PAYC: 6.49
SHOP: 6.04
SQ: 5.81
ADBE: 5.45
CRM: 5.23
AYX: 4.56
NEWR: 3.67
ZS: 2.73
NTNX: 2.36
OKTA: 1.89
MDB: .72

My takeaway is that using R40 really brings operating profit margin to the fore, putting it on par with accelerating revenue growth. We tend to emphasize revenue growth here. This makes sense to me. If revenue growth is accelerating and operating profit margin is improving, that's wonderful, but if you have to choose between the two, it's the revenue growth that is a better indicator of a healthy business with a long runway of growth.

Still, the results here are interesting, Wix is getting its turn to shine, and MongoDB finished dead last. There has been a lot of euphoria about Mongo on the board, and seeing this made me take a step back and consider that although Mongo has incredible revenue growth, it also has a high valuation and is still losing a lot of money. Losses continue to rise, as revenue goes up, albeit that revenue is going up faster.

I am thinking back to nutanix and the debacle about subscription revenue vs service revenue. I'm wondering if that applies to any of the other companies here, particularly elastic and mongo. From what I have gleaned it seems as if Elastic has a fairly high amount of service revenue. I don't know how Atlas work, and I wonder how much Atlas support Mongo needs to provide to each customer. The thesis for these sorts of companies is that costs will continue to rise linearly, and eventually revenue will take off exponentially. But if costs and revenue continue to rise in line with one another, the thesis fails.

It's really beyond me to make a good guess about how the cost vs revenue question will play out. Since Mongo is such a high confidence position here, I'm interested in people's take.

Does this metric mean anything?
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