2/ This will come as no surprise, but all these stocks have easily beaten the market over the past five years. With the exception of $VMW, all have at least tripled, and $ADBE and $NOW close to 400% gains! 
3/ As I've said before, revenue growth is always one of the first things I look at when evaluating investments (and Phil Fisher's first principle for looking at stocks).
$VMW's revenue growth has definitely lagged while $NOW's has taken off to the moon!
$VMW's revenue growth has definitely lagged while $NOW's has taken off to the moon!
4/ After looking at the top-line, let's look at operating income. Over past five years $CRM's and $ADBE's op income have exploded (leaving $NOW off the chart for this one).
5/ Just looking at this year's operating income though, you can see how once these companies turn on the profit spigot, bottom-line growth can explode upward (though admittedly off of a small base).
6/ After looking at growth, I always turn to some valuation metrics, starting with free cash flow yield. Remember, the higher the ratio the better return investors are receiving in exchange for their money.
Little surprise, slowest growing $VMW is most attractively valued.
Little surprise, slowest growing $VMW is most attractively valued.
7/ Let's look at the price-to-sales (P/S) ratio, essentially a company's market cap divided by its total revenue.
8/ We can look at P/E ratios for this batch too, though we'll leave $NOW off for now since it just turned profitable.
Obviously market believe $CRM and $ADBE have lots of future levels to pull for further profitability (I do too) with these high multiples.
Obviously market believe $CRM and $ADBE have lots of future levels to pull for further profitability (I do too) with these high multiples.
9/ Here's the P/E chart with $NOW included. Ha, that's why I left it off!
10/ Don't run through metrics w/o looking at margins. Here's where you see why these pricey stocks might be deserving of such lofty valuations.
The entire bunch boasts enviable gross margin numbers, and incredible how $CRM has held its margins so high for so long!
The entire bunch boasts enviable gross margin numbers, and incredible how $CRM has held its margins so high for so long!
11/ When looking at operating margins, $ADBE's is a thing of beauty, w/ $NOW and $CRM certain to leverage more profitability in years ahead. Right? RIGHT?
12/ These numbers are important, giving us a nice first glance, but don't think you're done with your research!
The most important thing I look for is an economic moat, or a competitive advantage. Those margins were impressive, but think they'll hold w/o a moat? Not a chance!
The most important thing I look for is an economic moat, or a competitive advantage. Those margins were impressive, but think they'll hold w/o a moat? Not a chance!
