A recent study by Garnier & Co revealed that European software vendors are highly valued in comparison with the US.
Indeed, it was found out that European software vendors are even trading at a valuation premium of around 9% compared to their US competitors. The study showed that if the stock market value is not only assessed on the basis of the simple sales multiple but on average growth as well, it puts EU vendors on a higher stand.
By doing so, it was reported that the valuations of software companies on the European stock exchanges are higher than companies listed in the US. For the listed SaaS providers, this results in an average premium of 8%.
This analysis is much closer to the reality of the stock market valuation as it relatives the significance of the short-term growth expectation for a single year. Moreover, it also showcased that the differences in the individual valuations of European software providers are wider than those of their US competitors.
Hence, this shows that the important factors are the quality of the business model and management, the degree of maturity, and the track record of data.
In order to do this study, 95 European-listed and 97 US-listed software vendors were compared between 2006 and 2020, including 29 European and 67 US SaaS vendors.