Link to the original article: RULE OF 40 INDEX
The Rule of 40 shows how well companies are balancing growth & profitability.
The Index measures how 84 publicly-traded Software-as-a-Service (SaaS) companies are performing along these two fundamental metrics. Learn more.
WHAT IS THE RULE OF 40?
The Rule of 40 is a popular “back of the envelope” calculation used to assess the value of public SaaS companies based on the trade-off between growth and profitability.
Companies will meet the Rule of 40 if year-over-year revenue growth rate plus profitability margin equals 40%.
HOW IS THE RULE OF 40 USED?
Data on public companies suggests that the greater the sum of a company’s growth plus profitability, the greater the revenue multiple assigned to that business.
This implies that the answer to growth or profitability is not one or the other but rather the impact of one on the other.
Learn more about the Rule of 40 and how it applies to your company →
INDEX CONSTITUENTS
| Ticker | Company | Industry | Stock Price | Market Cap | Revenue Growth | EBITDA Margin | EV / Revenue Multiple | Rule of 40 Score |
|---|---|---|---|---|---|---|---|---|
| BILL | Finance / Accounting | $175.75 | $18,204M | 189.5% | -40.2% | 27.6x | 149 | |
| BLND | Fintech | $4.53 | $1,052M | 164.4% | -73.5% | 2.4x | 91 | |
| DDOG | Infrastructure & Developer Tools | $120.20 | $37,855M | 83.7% | 3.5% | 28.4x | 87 | |
| ZI | Go-To-Market | $49.20 | $19,846M | 59.1% | 19.5% | 23.4x | 79 | |
| ZI | Go-To-Market | $47.40 | $19,120M | 59.1% | 19.5% | 22.6x | 79 | |
| SNOW | Infrastructure & Developer Tools | $177.76 | $55,923M | 101.5% | -38.1% | 33.2x | 63 | |
| CRWD | Security | $203.65 | $46,995M | 62.7% | -1.5% | 26.6x | 61 | |
| PAYC | Human Resources | $292.72 | $17,625M | 29% | 30.7% | 15.3x | 60 | |
| MNDY | Communication & Collaboration | $133.28 | $5,987M | 90.5% | -32.1% | 13.3x | 58 | |
| ADBE | Go-To-Market | $407.29 | $192,444M | 9.1% | 42.1% | 11.3x | 51 | |
| QLYS | Security | $139.00 | $5,401M | 15.8% | 34.8% | 11.2x | 51 | |
| VEEV | Go-To-Market | $187.59 | $29,036M | 22.4% | 26.1% | 13.8x | 48 | |
| HUBS | Go-To-Market | $390.71 | $18,647M | 46.5% | -0.8% | 12.3x | 46 | |
| ZM | Communication & Collaboration | $104.79 | $31,345M | 21.4% | 24.7% | 6.1x | 46 | |
| DT | Security | $39.71 | $11,346M | 31.6% | 13.1% | 11.7x | 45 | |
| PCTY | Human Resources | $194.58 | $10,723M | 34% | 7.2% | 13.7x | 41 | |
| SHOP |  Shopify |
Commerce Enablement | $452.98 | $57,137M | 41.1% | -1.4% | 9.2x | 40 |
| NET | Security | $89.91 | $29,314M | 53.7% | -14.3% | 37.2x | 39 | |
| NOW | Infrastructure & Developer Tools | $484.50 | $97,122M | 26.6% | 10.9% | 13.8x | 38 | |
| ADSK | Infrastructure & Developer Tools | $192.90 | $41,918M | 16.6% | 21.6% | 8.9x | 38 | |
| MIME | Security | $79.66 | $5,332M | 16.9% | 20.6% | 8.5x | 38 | |
| DOCN | Infrastructure & Developer Tools | $42.41 | $4,496M | 36.7% | 0.1% | 8.9x | 37 | |
| EVBG | Communication & Collaboration | $46.67 | $1,843M | 36% | -1.2% | 5x | 35 | |
| ZS | Security | $208.23 | $29,378M | 62.7% | -28.9% | 28.1x | 34 | |
| DBX | Communication & Collaboration | $22.09 | $8,349M | 12.2% | 22.2% | 4x | 34 | |
| CRM | Go-To-Market | $177.57 | $176,489M | 25.9% | 7.4% | 6.2x | 33 | |
| JAMF | Security | $31.21 | $3,735M | 36.1% | -4.3% | 9.5x | 32 | |
| DOCU | Finance / Accounting | $85.83 | $17,157M | 34.8% | -2.3% | 7.4x | 32 | |
| CWAN | Fintech | $18.38 | $3,410M | 27.4% | 2.8% | 11.7x | 30 | |
| ECOM | Commerce Enablement | $14.51 | $441M | 12.7% | 17% | 1.9x | 30 | |
| TEAM | Infrastructure & Developer Tools | $235.28 | $59,812M | 30.2% | -1.3% | 20.2x | 29 | |
| TWLO | Communication & Collaboration | $118.03 | $21,425M | 53.8% | -24.4% | 5.1x | 29 | |
| MDB | Infrastructure & Developer Tools | $359.59 | $24,296M | 55.8% | -27.7% | 22.2x | 28 | |
| SPT | Go-To-Market | $64.16 | $3,478M | 42.6% | -16.3% | 15.6x | 26 | |
| AVLR | Finance / Accounting | $79.76 | $7,005M | 34.8% | -8.7% | 8.3x | 26 | |
| ESTC | Infrastructure & Developer Tools | $77.37 | $7,231M | 42.5% | -16.9% | 7.8x | 26 | |
| FIVN | Communication & Collaboration | $116.07 | $8,073M | 32.6% | -9% | 11.3x | 24 | |
| APPF | Real Estate | $104.44 | $3,644M | 32% | -9.2% | 9.4x | 23 | |
| AMPL | Commerce Enablement | $17.26 | $1,924M | 64.3% | -41.7% | 8.2x | 23 | |
| PATH | Infrastructure & Developer Tools | $18.57 | $10,066M | 39.4% | -15.9% | 7.1x | 23 | |
| SQSP |  Squarespace |
Commerce Enablement | $21.21 | $2,967M | 20.4% | 2.8% | 3.9x | 23 |
| WK | Finance / Accounting | $96.66 | $5,029M | 28.7% | -6.9% | 10x | 22 | |
| TENB | Security | $56.35 | $6,214M | 29.4% | -7.1% | 9.6x | 22 | |
| RNG | Communication & Collaboration | $87.23 | $8,238M | 34.1% | -12.5% | 5.4x | 22 | |
| WDAY | Human Resources | $208.41 | $52,310M | 21.6% | -0.9% | 9.2x | 21 | |
| Olo | Commerce Enablement | $10.96 | $1,755M | 30.8% | -9.5% | 7.8x | 21 | |
| SPLK | Security | $123.92 | $19,913M | 20.9% | 0.1% | 6x | 21 | |
| MNTV | Go-To-Market | $15.55 | $2,340M | 16.2% | 3.7% | 4.9x | 20 | |
| BOX | Communication & Collaboration | $30.38 | $4,357M | 17.3% | 1.6% | 5.3x | 19 | |
| GTLB | Infrastructure & Developer Tools | $50.62 | $7,471M | 68.6% | -50.3% | 21.1x | 18 | |
| ZEN | Go-To-Market | $122.14 | $14,967M | 30.3% | -13.5% | 9.5x | 17 | |
| FROG | Infrastructure & Developer Tools | $21.77 | $2,147M | 38.8% | -22.7% | 7.4x | 16 | |
| CXM | Go-To-Market | $14.08 | $3,615M | 30.3% | -14.6% | 5.7x | 16 | |
| OKTA | Security | $123.97 | $19,425M | 63.2% | -48.6% | 12.4x | 15 | |
| S | Security | $33.79 | $9,182M | 119.8% | -105.5% | 28.7x | 14 | |
| BL | Finance / Accounting | $67.12 | $3,979M | 20.5% | -6.1% | 8.5x | 14 | |
| SMAR | Communication & Collaboration | $49.84 | $6,411M | 43.2% | -30.2% | 9.6x | 13 | |
| TWOU | Ed-Tech | $10.48 | $806M | 13.2% | -0.3% | 1.6x | 13 | |
| BNFT | Human Resources | $10.82 | $362M | -1.5% | 13.2% | 1.9x | 12 | |
| NCNO | Fintech | $38.86 | $4,273M | 32.5% | -22.7% | 14.1x | 10 | |
| QTWO | Fintech | $53.03 | $3,033M | 15.1% | -4.8% | 6x | 10 | |
| BIGC | Commerce Enablement | $18.79 | $1,364M | 41.6% | -31.3% | 5x | 10 | |
| U | Infrastructure & Developer Tools | $68.65 | $20,318M | 43.4% | -35.2% | 16.1x | 8 | |
| COUP | Finance / Accounting | $88.93 | $6,675M | 18.2% | -13.5% | 9.9x | 5 | |
| APPN | Infrastructure & Developer Tools | $50.90 | $3,681M | 28.6% | -23.1% | 8.5x | 5 | |
| PLAN | Finance / Accounting | $65.08 | $9,775M | 32.8% | -30.4% | 14.6x | 2 | |
| NEWR | Infrastructure & Developer Tools | $63.71 | $4,216M | 22.4% | -20.3% | 4.9x | 2 | |
| PD | Infrastructure & Developer Tools | $29.66 | $2,582M | 32.4% | -31.8% | 7.5x | 1 | |
| ALKT | Fintech | $13.44 | $1,215M | 27.3% | -26.3% | 5.5x | 1 | |
| AYX | Infrastructure & Developer Tools | $66.54 | $4,533M | 8.3% | -9.5% | 6.8x | -1 | |
| FRSH | Go-To-Market | $18.11 | $5,135M | 44.5% | -47.6% | 9x | -3 | |
| PCOR | Real Estate | $55.50 | $7,521M | 33.4% | -37.6% | 12x | -4 | |
| VTEX | Commerce Enablement | $5.23 | $999M | 27.5% | -33.7% | 4.8x | -6 | |
| WIX | Commerce Enablement | $79.88 | $4,545M | 18% | -28.8% | 2.9x | -11 | |
| ASAN | Communication & Collaboration | $28.15 | $5,351M | 63.7% | -75.8% | 11.8x | -12 | |
| YEXT | Go-To-Market | $5.90 | $769M | 9.5% | -21.2% | 1.6x | -12 | |
| PRO | Commerce Enablement | $28.91 | $1,306M | 6.8% | -24.7% | 5.4x | -18 | |
| ZUO | Fintech | $12.60 | $1,613M | 14.4% | -33.1% | 4x | -19 | |
| DOMO | Infrastructure & Developer Tools | $43.40 | $1,463M | 23.1% | -42.9% | 5.4x | -20 | |
| CFLT | Infrastructure & Developer Tools | $31.15 | $8,662M | 70.5% | -93.8% | 16.2x | -23 | |
| AI | Infrastructure & Developer Tools | $18.12 | $1,927M | 42.1% | -65.9% | 3.3x | -24 | |
| FSLY |  Fastly |
Infrastructure & Developer Tools | $16.60 | $2,006M | 18.2% | -43.1% | 5.1x | -25 |
| SUMO | Infrastructure & Developer Tools | $9.79 | $1,117M | 23.8% | -48.4% | 2.9x | -25 | |
| XM | Go-To-Market | $18.44 | $10,732M | 40.6% | -79.6% | 7.6x | -39 |
NOTES & DISCLAIMERS
The information provided within the Rule of 40 Index is for general informational and discussion purposes only. Under no circumstances should any information provided within the Rule of 40 Index be used or considered as investment or other financial advice of any kind by Volition Capital. Volition Capital makes no warranties, express or implied, or representations regarding any such information or the data presented herein. Volition Capital and/or its affiliates, employees, and clients may purchase, sell or hold securities of issuers presented in the Rule of 40 Index at any time, including prior to or following an issuer’s addition or removal from the Rule of 40 Index.
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