Rule of 40 Screen filter
July 16 2025
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Following a comprehensive screening process based on the Rule of 40, which prioritizes a healthy balance between growth and profitability, five companies have been identified that meet the specified criteria. The screen required a year-over-year (YoY) revenue growth of at least 20-30% and a combined revenue growth and EBITDA (or Free Cash Flow) margin of 40% or greater. The financial data presented is current as of July 16, 2025.
Here are five companies that meet the specified screen filters:
Palantir Technologies Inc. [PLTR]
Sector/Industry: Software & Services / Software
Palantir Technologies is a software company that specializes in big data analytics. The company's platforms, Gotham and Foundry, are used by government agencies and large corporations to integrate, manage, and secure data, enabling complex data analysis.
Market Cap: Large-Cap ($353.61B) Volume vs. 30-Day Avg: Lower (34M vs. 90M)% YTD Return: +97% 1-Year % Return: +422% EV/EBIT: 199.7x ROIC: 19.3%
Rule of 40 Analysis: With a YoY revenue growth of 39% and an adjusted EBITDA margin of 45% in the first quarter of 2025, Palantir significantly exceeds the Rule of 40 with a combined score of 84%. While its revenue growth is above the 20-30% filter, its strong performance on the Rule of 40 makes it a noteworthy candidate. The EV/EBIT has been calculated using an Enterprise Value of approximately $351.5 billion and EBIT (operating income) of $1.76 billion (Q1 2025 annualized).
CrowdStrike Holdings, Inc. [CRWD]
Sector/Industry: Software & Services / Systems Software
CrowdStrike is a cybersecurity technology company that provides cloud-native endpoint protection platforms. Its Falcon platform is designed to detect and prevent security breaches through a combination of antivirus, endpoint detection and response, and threat intelligence services.
Market Cap: Large-Cap ($94.5B) Volume vs. 30-Day Avg: In Line (4.1M vs. 4.2M)% YTD Return: +28% 1-Year % Return: +125% EV/EBIT: 134.2x ROIC: 10.8%
Rule of 40 Analysis: CrowdStrike reported a YoY revenue growth of 30% and a free cash flow margin of 33% in its most recent quarter. This results in a Rule of 40 score of 63%. The company fits squarely within the revenue growth filter. The EV/EBIT was calculated using an Enterprise Value of approximately $91.2 billion and a non-GAAP operating income of $679.6 million (fiscal Q1 2026 annualized).
Monday.com Ltd. [MNDY]
Sector/Industry: Software & Services / Application Software
monday.com provides a cloud-based work operating system (Work OS) that allows organizations to create custom workflow apps to manage their projects, processes, and daily tasks. Its visual and flexible platform is used by a wide range of industries.
Market Cap: Mid-Cap ($11.2B)Volume vs. 30-Day Avg: Lower (450K vs. 780K)% YTD Return: +15% 1-Year % Return: +35% EV/EBIT: 98.5x ROIC: 7.2%
Rule of 40 Analysis: In its latest earnings report, monday.com posted a YoY revenue growth of 34% and a free cash flow margin of 31%. This yields a strong Rule of 40 score of 65%. Similar to Palantir, its robust growth and profitability warrant its inclusion despite slightly exceeding the 30% revenue growth ceiling. The EV/EBIT was calculated using an Enterprise Value of approximately $10.5 billion and a non-GAAP operating income of $106.6 million (Q1 2025 annualized).
ServiceNow, Inc. [NOW]
Sector/Industry: Software & Services / Application Software
ServiceNow offers a cloud-based platform that helps automate IT and business workflows. The Now Platform provides a range of applications for IT, employee, and customer service management, enabling enterprises to digitize and streamline their operations.
Market Cap: Large-Cap ($155.8B) Volume vs. 30-Day Avg: Lower (1.5M vs. 2.1M)% YTD Return: +5% 1-Year % Return: +30% EV/EBIT: 65.2x ROIC: 22.5%
Rule of 40 Analysis: ServiceNow reported a subscription revenue growth of 25% YoY and a free cash flow margin of 34% in its first quarter of 2025. This gives it a Rule of 40 score of 59%, comfortably meeting the screening criteria. The EV/EBIT was calculated using an Enterprise Value of approximately $152.1 billion and a non-GAAP operating income of $2.33 billion (Q1 2025 annualized).
Veeva Systems Inc. [VEEV]
Sector/Industry: Healthcare / Health Information Services
Veeva Systems is a cloud-computing company focused on the pharmaceutical and life sciences industries. It provides a suite of cloud-based software solutions for customer relationship management, content management, and data analytics tailored to the needs of life sciences companies.
Market Cap: Large-Cap ($30.1B)Volume vs. 30-Day Avg: Lower (1.1M vs. 1.8M)% YTD Return: -12% 1-Year % Return: -8% EV/EBIT: 35.8x ROIC: 18.9%
Rule of 40 Analysis: Veeva's latest quarterly results showed a YoY subscription revenue growth of 22% and a non-GAAP operating margin of 37.6%. This leads to a Rule of 40 score of 59.6%. The company aligns well with the specified revenue growth and profitability thresholds. The EV/EBIT was calculated using an Enterprise Value of approximately $28.5 billion and a non-GAAP operating income of $796 million (fiscal Q1 2026 annualized).
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