A company’s valuation multiple can be highly sensitive to the choice of denominator. You are making an apples-to-grapefruits comparison by trying to equate “sel

A company’s valuation multiple can be highly sensitive to the choice of denominator. You are making an apples-to-grapefruits comparison by trying to equate “seller discretionary revenue” with US GAAP net income per share. The SDR calculation [1] excludes compensation and looks like a generous net revenue measure. Earnings per share -- from which P/E multiples on public companies are typically calculated -- includes compensation, interest expense, various non-cash adjustments, and adjustment for dilution.[2] Generally you would expect the SDR number to be higher than net income and correspondingly attract a lower multiple in estimating firm value. As others have commented, there are additional reasons why valuation metrics for large-cap listed companies don’t make for useful comparison with SaaS startups. See also Heidi Roizen’s cautionary tale [3] about the perils of multiple envy. [1] https://news.ycombinator.com/item?id=9589223 https://news.ycombinator.com/item?id=9589223 [2] https://en.wikipedia.org/wiki/Earnings_per_share https://en.wikipedia.org/wiki/Earnings_per_share see also ../Net_income [3] https://news.ycombinator.com/item?id=9516910 https://news.ycombinator.com/item?id=9516910