2020 SaaS review

Shih-Min Lee
posted on: 2021-01-03

2020 is an interesting year for SaaS companies. Some of them went public and gained huge success in the stock market. Some of them continued their rally from 2016-2019 and have another great year. Some of them have greater success than the others because of their business models in the work-from-home environment. And there's a common thing for those SaaS companies, that is: those companies probably developed something people want.

The following is a list of the top 15 SaaS performers in our database in the last 250 days as of December 31, 2020.

Some of the companies here are getting a lot of attention this year. Terminologies like Zoom Fatigue even appeared in the second quarter. It seems everyone was talking about Zoom at some point. And that's reasonable because Zoom is the clear winner in this video conferencing space. They keep your company operational by providing you a smooth video call user experience for your employees and your clients. There are literally companies built on top of Zoom calls that provide you remote journey experiences, and they do great because of Zoom and Covid.

Cybersecurity is also something to worry about for companies in 2020. Intuitively, when companies are working remotely it would be harder for companies to safeguard their infrastructure. That's when companies like CrowdStrike or Zscalar or Okta come into play. Okta help companies manage their employees' access identities. Zscalar and CrowdStrike protect your web infrastructure using technologies to derive insights from your data and protect your infrastructure in real-time or near real-time.

Also when a lot of people are working remotely you'd expect Internet usage to go up. Cloudflare is a CDN company that help websites serve their requests fast. Fastly is also doing similar things in the video CDN space and helps companies like TikTok serve their videos. And as more people spend more time on their mobile devices those companies also do well. And to support those web requests you need companies like Twilio to send you SMS messages or phone calls, without Twilio you might not even able to login to your apps.

Also when people are staying at home people have more time to get creative. So maybe people start selling stuff on Shopify or Etsy or Pinterest or create websites on Wix. And at the same time, you have marketing companies like Facebook or TradeDesk or Digital Turbine to help you advertise your stuff on mobile devices. The success stories for those SaaS companies are inter-connected.

There are many other interesting SaaS companies that are not mentioned above. They are not in the top 15 maybe because they're not directly related to the stay-at-home trend, but that doesn't mean they're less interesting. As a software engineer, I have to use application monitoring services, database services, image compression and processing services, mailing services... and many others. This is what makes a modern software company functional. And as long as your company is growing you would continue to add and look for the best services for your company. And when more companies are becoming software companies I can imagine those SaaS companies to have a great future ahead.

A few things in common here for the companies on the list:

  • They grow REALLY fast. A lot of the companies on the list are growing 40-80% a year.
  • They all have really high gross profit margins.
  • They're traded at a very high valuation. A lot of them have a p/s ratio of 40-60.
  • The majority of them are losing money.
  • They don't pay dividends.

A possible explanation is that there are no clear winners in the space they're operating in, so they're doing whatever it takes to make sure they win in the long run. And of course that means they cannot afford to pay dividends. Also they're all traded at astronomical levels of valuations maybe because they have high profit margins, and the future for those companies are expected to be good.

Take DocuSign for example. They're one of the pioneers in e-signature. But e-signature is some sort of niche market. You may come up with another e-signature solution with a small team but by the time you have the solution in place you might already be spending millions achieving zero revenue while DocuSign might grow revenue another 40%. In the end there's just not enough market share for you to survive. So it would not be a good idea to copy DocuSign business model, this makes DocuSign (and all the SaaS companies) unique in a way.

If you look back at Amazon anytime in the past 20 years you'll see it's always traded at high multiples. It is still traded at high multiples today but would anyone complain that Amazon is too expensive? Probably not. Because now we know Amazon is dominating in any spaces they're operating in, we just couldn't see it 20 years ago. So maybe there's a correction between winning and being expensive and that's why all the cloud stocks are expensive because there's a chance all of them are dominating in their space in the next 5-10 years.

But, of course, being expensive does not mean the company would be successful eventually. But if you want to look for something good in the next 5-10 years there's a chance it's on the list but you just don't know it yet.


Related Tickers:
ASAN - Asana, Inc   69.7% since post

NEWR - New Relic, Inc   51.22% since post

GOOG - Alphabet Inc   48.31% since post

PANW - Palo Alto Networks, Inc   36.1% since post

DDOG - Datadog, Inc   27.57% since post

ECOM - ChannelAdvisor Corporation   27.27% since post

ZS - Zscaler, Inc   21.15% since post

TEAM - Atlassian Corporation Plc   20.82% since post

NET - Cloudflare, Inc   16.48% since post

BILL - Bill.com Holdings, Inc   14.94% since post

ZUO - Zuora, Inc   14.69% since post

DT - Dynatrace, Inc   11.89% since post

PCOM - Points International Ltd   11% since post

JAMF - Jamf Holding Corp   9.2% since post

HUBS - HubSpot, Inc   7.71% since post

AKAM - Akamai Technologies, Inc   7.22% since post

DBX - Dropbox, Inc   4.53% since post

WDAY - Workday, Inc   2.36% since post

ADBE - Adobe Inc   -0.1% since post

CRM - salesforce.com, inc   -1.81% since post

SNOW - Snowflake Inc   -4.91% since post

NOW - ServiceNow, Inc   -7.93% since post

GDDY - GoDaddy Inc   -13.58% since post

SMAR - Smartsheet Inc   -16.91% since post

VEEV - Veeva Systems Inc   -18.41% since post

ADSK - Autodesk, Inc   -21.72% since post

SHOP - Shopify Inc   -22.17% since post

CRWD - CrowdStrike   -22.18% since post

OKTA - Okta, Inc   -26.07% since post

PD - PagerDuty, Inc   -28.12% since post

APPS - Digital Turbine, Inc   -29.83% since post

FIVN - Five9, Inc   -30.01% since post

SPLK - Splunk Inc   -32.15% since post

ZEN - Zendesk, Inc   -33.82% since post

DOMO - Domo, Inc   -36.07% since post

BL - BlackLine, Inc   -36.08% since post

PLAN - Anaplan, Inc   -38.14% since post

APPF - AppFolio, Inc   -38.63% since post

AVLR - Avalara, Inc   -40.38% since post

TWLO - Twilio Inc   -43.25% since post

ESTC - Elastic N.V   -43.8% since post

DCT - Duck Creek Technologies, Inc   -44.13% since post

DOCU - DocuSign, Inc   -47.78% since post

WIX - Wix.com Ltd   -48.55% since post

LPSN - LivePerson, Inc   -52.45% since post

RNG - RingCentral, Inc   -55.89% since post

ZM - Zoom Video Communications, Inc   -56.26% since post

AYX - Alteryx, Inc   -56.42% since post

FROG - JFrog Ltd   -60.91% since post

SUMO - Sumo Logic, Inc   -61.35% since post

COUP - Coupa Software Incorporated   -62.43% since post

FSLY - Fastly, Inc   -67.85% since post

APPN - Appian Corporation   -68.34% since post

TTD - The Trade Desk, Inc   -92.57% since post

WORK    -100% since post

CLDR    -100% since post

PFPT    -100% since post

AAXN    -100% since post

MDLA    -100% since post

SVMK    -100% since post

Have some comments? What do you think about this company?

By: henryph2412 Enthusiast 
67 • 

Great insights. I love Earningsfly and deeply appreciate your efforts, and I share your vision.


By: forvino lazy guy 
80 • 

Like always i m looking on this area for next potential amzn. Hopefully will be find it here with the help of earnings fly.


By: ssmlee04 Community Lead 
4 • 5 • 2062 • 

Thanks. Also feel free to share with us some companies you think would outperform in the next while. :)

Find the next Tesla with traders

Find out why is Tesla good with other traders and discover the next big things in the stock market.