R40 Rule of 40

Rule of 40 by Company

All 80 tracked stocks with reported Rule of 40, ranked highest first on the latest quarter each has reported.

n/m — not meaningful: extreme revenue growth or cash flow relative to revenue distorts the score. These rows are unranked and use zero only as their ordering position.

† — no year-ago R40 to compare against: too little reported history to trend the score, so these rows rank below the companies with a full year-over-year comparison.

FY — quarters on the company's own off-calendar fiscal year; unprefixed quarters follow the calendar year.

Formula

How to Interpret

A score ≥ 40 means the company has a strong balance of growth and profitability. A fast-growing company can afford lower margins, while a slower-growing one needs higher margins to compensate. Scores below 40 suggest the company may be burning cash without sufficient growth to justify it.

Why It Matters

The Rule of 40 is the single best quick-check for SaaS and high-growth companies. It forces a trade-off: growth or margins — you need enough of at least one. Companies consistently above 40 tend to create significant shareholder value.

Example

A company growing revenue at 25% YoY with a 20% FCF margin scores 45 — passing. A company growing at 10% with a 5% margin scores 15 — failing.

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