P/E (price/earnings) isn't really useful when you're talking about a company that is still growing rapidly. Think about it, on day 1 a startup has zero earnings, so it's P/E is some positive number divided by 0 which is literally infinity!
So any successful startup is marching down a curve starting from infinity downward. It might have a P/E of 1,000,000 on a certain day, that doesn't really mean much.
A much more useful number is called the "Rule of 40." The idea is that the sum of the revenue growth rate and profit margins should be 40% or higher for a well-performing SaaS company.
This makes sense right? When we invest in companies we don't really care about how much money they made yesterday, we care about how much money they are going to make tomorrow.
To understand that we need to know 1. how fast are they growing their revenue (revenue growth rate), and 2. how much money do they make when they sell their good?
If you're increasing the rate at which you sell your products, and you make a lot of money on every product you sell, then you are going to make a lot more money in the future than you are currently making.
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