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SaaS Valuation Metrics: EBITDA, Revenue & EV Multiples
- CLFI Team
- 6 min read
Valuing SaaS businesses is rarely straightforward. Revenue is recurring, growth expectations are high, and profitability often lags scale, which means no single metric captures the full economic picture. As a result, valuations typically combine revenue multiples, EBITDA multiples, and cash-flow analysis rather than relying on one approach alone.
The proposed take-private transaction involving Semrush offers a practical example of how these methods are applied together. The analyses prepared for the board show how valuation in the SaaS sector depends on ranges, informed judgment, and cross-checks between methodologies, highlighting why EBITDA multiples must be interpreted in context rather than treated as standalone indicators.
These valuation approaches, including relative valuation using comparable multiples and precedent transactions alongside DCF cross-checks, are examined in the Business Valuation Executive Course.
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SaaS Valuation Context and Sector Characteristics
SaaS businesses are built on economics that look simple on the surface but are complex in practice. Recurring revenue and low marginal costs create strong operating leverage over time, yet reaching that scale usually requires sustained spending on product development, marketing, and customer acquisition. As a result, reported profitability often understates the long-term earning potential of the business during its growth phase.
This structural trade-off shapes how SaaS companies are valued. Revenue multiples help investors assess growth, customer traction, and market positioning, while EBITDA becomes more informative as the business matures and cost discipline improves. In the Semrush case, this balance is evident: profitability is present, but valuation relies on interpreting EBITDA alongside revenue growth and forward-looking cash generation rather than treating it as a definitive measure.
What EBITDA Multiples Measure in SaaS
Definition:
EBITDA Multiple
The enterprise value of a company divided by its earnings before interest, taxes, depreciation, and amortisation, typically adjusted for non-recurring or non-cash items.
In SaaS, EBITDA multiples are often adjusted to exclude share-based compensation and one-off items, reflecting the sector’s reliance on equity incentives and growth-phase distortions. This adjustment increases comparability across firms, but also introduces judgment, as the definition of “normalised” earnings is not uniform.
The benefit of EBITDA multiples lies in their focus on operating performance before capital structure. The risk is that they may overstate sustainable earnings if a meaningful portion of operating costs is deferred through accounting adjustments rather than eliminated economically. For this reason, EBITDA multiples are rarely interpreted in isolation in SaaS valuation decisions.
In practice, this has led analysts and boards to pay closer attention to the scale and role of equity-based compensation when assessing profitability and valuation signals in high-growth software businesses.
Explainer: Stock-Based Compensation in High-Growth Software Firms
Definition:
Stock-Based Compensation (SBC)
A form of employee pay delivered in equity instruments (such as shares, share options, or restricted stock units). Under accounting rules, the company recognises an expense for this compensation over the vesting period, even though it is not a cash payment at the time. SBC can reduce reported profit and can also dilute existing shareholders when equity awards convert into shares.
Stock-Based Compensation (SBC) Intensity, Selected SaaS Companies
Two comparative ratios, aligned to the reporting period shown in each company filing.
| Company | Period reported | SBC / Operating expenses | SBC / Revenue |
|---|---|---|---|
| Asana | Twelve months ended Jan 31, 2025 | 23.1% | 29.2% |
| Datadog | Nine months ended Sep 30, 2025 | 26.9% | 22.0% |
| UiPath | Twelve months ended Jan 31, 2025 | 26.6% | 25.0% |
Footnote: Figures extracted from company SEC filings and related earnings materials; ratios computed by CLFI for comparability.
Public Comparable Multiples in Practice
With this context in mind, valuation analysis typically shifts back to observable market benchmarks. When valuing Semrush, a peer group of publicly traded digital marketing and analytics companies was examined to establish reference trading ranges. These peers exhibited enterprise-value-to-revenue ratios clustering around the low-to-mid single digits, while EBITDA multiples, where meaningful, tended to sit in the high single-digit to low-teens range.
The dispersion within this group was significant. Several companies generated insufficient EBITDA for the metric to be reliable, reinforcing a common SaaS pattern: revenue scale often precedes profitability. As a result, median values, rather than extremes, were emphasised when forming valuation reference ranges.
This pattern is visible in the composition of the peer group itself. Within the selected public comparables, a material share of companies traded on revenue multiples despite generating insufficient EBITDA for the metric to be meaningful (n.m.), reinforcing the need to anchor valuation ranges around medians rather than outliers.
| Peer company | NTM EV / Revenue | NTM Adj. EBITDA | EBITDA status |
|---|---|---|---|
| Amplitude Inc. | 3.3x | n.m. | Pre-profitability |
| Braze, Inc. | 3.5x | n.m. | Pre-profitability |
| Similarweb Ltd. | 1.9x | n.m. | Pre-profitability |
| DoubleVerify Holdings | 1.9x | 5.8x | EBITDA-positive |
| Freshworks Inc. | 3.0x | 13.5x | EBITDA-positive |
| Sprinklr, Inc. | 1.6x | 8.6x | EBITDA-positive |
| Sprout Social, Inc. | 1.1x | 9.2x | EBITDA-positive |
| Zeta Global Holdings | 3.0x | 13.2x | EBITDA-positive |
| Median (peer set) | 2.5x | 9.2x | — |
Source: Semrush proxy filing, Selected Public Company Analysis (Centerview), pages 56–57.
Importantly, the analysis did not apply these multiples mechanistically. Qualitative adjustments were made to reflect differences in growth profiles, margin trajectories, customer concentration, and product positioning. This reinforces a central lesson for boards: comparables inform valuation, but they do not determine it.
Programme Content Overview
The Executive Certificate in Corporate Finance, Valuation & Governance delivers a full business-school-standard curriculum through flexible, self-paced modules. It covers five integrated courses — Corporate Finance, Business Valuation, Corporate Governance, Private Equity, and Mergers & Acquisitions — each contributing a defined share of the overall learning experience, combining academic depth with practical application.
Chart: Percentage weighting of each core course within the CLFI Executive Certificate curriculum.
Price Is a Data Point. Value Is a Decision.
Learn more through the Executive Certificate in Corporate Finance, Valuation & Governance – a structured programme integrating governance, finance, valuation, and strategy.
What Precedent Transactions Reveal
Recent acquisitions of SaaS and digital platform companies provide an additional benchmark for valuation. Transactions involving both strategic acquirers and private equity sponsors displayed revenue multiples broadly consistent with public market medians, with a modest premium reflecting control and execution optionality.
The median transaction multiple sat slightly above prevailing trading levels, but not materially so. This indicates that, in more mature SaaS segments, acquisition pricing remains anchored to operating fundamentals rather than speculative growth assumptions. The strength of precedent analysis lies in its grounding in realised outcomes, while its limitation is the risk of extrapolating from transactions shaped by highly specific strategic circumstances.
| Announcement date | Target | Acquirer | EV / NTM Revenue |
|---|---|---|---|
| Oct 2025 | Jamf Holding Corp. | Francisco Partners | 2.9x |
| Sep 2025 | Integral Ad Science | Novacap | 3.0x |
| Sep 2025 | PROS Holdings | Thoma Bravo | 3.7x |
| Jul 2025 | Olo Inc. | Thoma Bravo | 4.3x |
| Oct 2024 | Zuora, Inc. | Silver Lake | 3.2x |
| Jun 2024 | WalkMe Ltd. | SAP SE | 3.9x |
| Oct 2023 | LiveVox Holdings | NICE Ltd. | 2.5x |
| Mar 2023 | Momentive Global | STG Partners | 2.9x |
| Median | 3.1x | ||
Source: Semrush Holdings, Inc. proxy filing; Selected Precedent Transactions Analysis prepared by Centerview Partners.
Discounted Cash Flow as a Valuation Anchor
To complement market-based benchmarks, a discounted cash flow approach was used as a cross-check. This method translated forecast operating performance into intrinsic value by discounting projected free cash flows at a cost of capital reflecting both business-specific and broader market risk.
Terminal value assumptions were derived from EBITDA exit multiples consistent with observed SaaS benchmarks. This linkage highlights an often-overlooked point: even discounted cash flow models ultimately rely on multiple assumptions. Their value lies in making those assumptions explicit and internally consistent rather than in producing a single definitive outcome.
The resulting valuation range overlapped with the outcomes implied by public comparables and precedent transactions, reinforcing the importance of triangulation over precision. For decision-makers, this convergence was more informative than the selection of any specific midpoint.
Boardroom Implications for SaaS Valuations
The Semrush case highlights that EBITDA multiples in SaaS should be interpreted as signals, not verdicts. They work best when combined with revenue metrics, transaction evidence, and cash-flow analysis. Used in isolation, they risk oversimplifying businesses whose economics evolve rapidly with scale.
Boards are therefore better served by focusing less on defending a specific multiple and more on understanding what underpins it: margin sustainability, growth efficiency, and capital intensity. These drivers shape whether a given multiple is conservative, reasonable, or optimistic.
Effective valuation discussions move away from headline numbers and toward scenario reasoning. When directors understand how EBITDA multiples change under different growth and margin paths, valuation becomes a strategic tool rather than a point of contention.
Disclaimer: This article is provided for educational and informational purposes only. It does not constitute investment advice, valuation advice, or a recommendation regarding any transaction or security. Valuation outcomes depend on assumptions, market conditions, and company-specific factors that may change materially over time.
References:
- Semrush Holdings, Inc. — SEC Filings
- Executive Certificate in Corporate Finance, Valuation & Governance — Module 3: Business Valuation