Two software companies: one grows fast and burns cash, the other grows slowly and throws off cash. Compare them on the rule of 40 and growth-adjusted multiples, and say which looks cheaper.

Nimbet looks cheaper on what is proven today; Stackvara looks cheaper only per point of growth. Nimbet scores 45 on the rule of 40 against Stackvara's 35, and costs 0.18x ARR per point against 0.34x. Per point of growth alone, Stackvara is cheaper, 0.27x against 0.53x. Stackvara's 125% retention is the best evidence its growth lasts, so the question is how long it stays above 30%.

A young shop that spends heavily to open new branches and a mature shop that banks most of its takings can both be good businesses; the question is whether the spending is buying enough growth. The rule of 40 adds revenue growth to free cash flow margin, so a company can earn its score through growth, through cash, or through a mix, and 40 is the line investors treat as healthy. Stackvara scores 45 minus 10, 35. Nimbet scores 15 plus 30, 45. On this measure Nimbet is the stronger business today, even though it grows a third as fast.

Divide the multiple by what you are paying for. Per point of growth Stackvara is cheaper, 0.27x ARR against 0.53x; per point of rule of 40 score Nimbet is cheaper, 0.18x against 0.34x. The two adjustments disagree because one ignores cash. Nimbet produces Rs 240 crore of free cash flow a year, so its Rs 6,400 crore enterprise value is about 27x cash flow; Stackvara burns Rs 50 crore a year and has no cash multiple at all.

Retention is the durability test. Net revenue retentionRevenue this year from customers who were customers a year ago, divided by what they paid last year; above 100% means existing customers spend more over time. of 125% means Stackvara's existing customers alone grow revenue 25% a year, so more than half its 45% growth needs no new sales. Nimbet's 105% gives it only 5 points from its base. Run a simple test: if Stackvara's growth slows to 35% and then 25%, its ARR in three years is about Rs 1,223 crore, roughly the same as Nimbet's Rs 1,217 crore at a steady 15%. On that three-year ARR, Stackvara costs 4.9x and Nimbet 5.3x, but only Nimbet is certain to be producing cash by then.

Close with a view and its condition. Nimbet is cheaper on today's evidence: a higher score, real cash flow and a lower multiple. Stackvara is cheaper only if its growth decays slowly and its margin turns positive, and 125% retention makes that more plausible than for most fast growers. The limit of both rules is that they are cross-sectional shortcuts; neither replaces a view on how long growth lasts and what margins look like at maturity.