The gap between Top 5 and Median EV/NTM Revenue Multiples for Cloud Software Stocks has been normalizing quite rapidly.
![](https://cdn.commonstock.com/67bc98052005f58a645c15294bbcebd931d94ccba30ab8d21cb13ec524002a7f-1061x621.png)
Source: [https://cloudedjudgement.substack.com/p/clouded-judgement-5622?s=r](https://cloudedjudgement.substack.com/p/clouded-judgement-5622?s=r)

How do you view the current drop in multiples within the context of history -- yes, they've come off by quite a bit, but not at an extreme on the low end yet.

Andermatt Research

Every week I’ll provide updates on the latest trends in cloud software companies. Follow along to stay up to date! How Far Have We Fallen?? What a few weeks / months for cloud software. While it’s felt like the world has fallen off a cliff (and we have), where we stand today really isn’t that crazy. The 5 year average cloud software multiple (pre covid, so 2015-2020) was 7.8x NTM revenue. The current median is 7.4x. So despite the MASSIVE correction (many companies down 50-80%), we’re only 5% below what I would consider a “normal” multiple. I think everyone would agree it’s hard to feel “normal” right now. Now, I’d argue that the quality of the cloud software basket today is higher than what it was from 2015-2020. So comparing the LT average to current median isn’t totally apples to apples. I took a swag at what the LT average would be if it included companies that are public today but not back then (the list is long), but we’d still only be ~10-15% below the long term average. It can be a bit jarring thinking about this given it sure feels like we should be well below the long term average.

https://cloudedjudgement.substack.com/p/clouded-judgement-5622?s=r

Clouded Judgement 5.6.22

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