Rule of 40 is where SaaS valuation meets reality

Growth alone isn’t enough 👇

Chart combines NTM growth + GAAP EBITDA margin

• >40 = high-quality balance (green) • 30–40 = acceptable (yellow) • <30 = weak efficiency (red)

Market is clearly rewarding balance, not just growth

Leaders:

$APP — Rare combo: high growth + strong margins $MSFT — Scale + profitability still unmatched

$FICO / $ORCL / $DOCN Efficient growers with strong margins

High growth: $PLTR $ZETA

Premium names under pressure:

$CRWD $DDOG $TEAM Good growth, but margins still catching up

Many SaaS names sit below 30x → growth slowing + profitability not there yet

SaaS is moving from “grow fast” → “grow efficiently”

Rule of 40 is becoming the filter

Which SaaS names actually deserve premium multiples?