It is interesting to watch how the market attributes multiples to different companies.

Companies that command a higher multiple generally have:

1 - High rate of innovation and new product rollouts ($NET $NVDA $TSLA)

2 - Consistently high revenue growth in large secular trends $SE

3 - Strong product leaders in a new category with brand recognition. ($RBLX, $TSLA, $DOCU $BILL, $SNOW)

4 - low reputational risk / low political risk / low headline risk ( think ‘sin stocks’ or Uber / Lyft dealing with freelance employee regulations or Chinese companies)

5 - High engagement $SNAP

Side note - subscription based businesses command a higher multiple and they generally deserve it. If a 100mm SaaS business wants to grow by 25% they only need to sell an incremental 25mm. A non subscription based company needs to sell 100mm plus 25mm in year 2 to grow 25%.

Companies with lower multiples:

1 - Industries in secular decline such as oil

2 - Highly regulated markets such as healthcare

3 - Low revenue growth

4 - Industries that may have become commoditized

5 - Legacy companies that are quickly losing market share to new entrants

What am I missing!