Ryan Petersen: Freight Forwarders Can Also Enjoy Tech Valuations, Technology Is Not the Reason for Valuation, Scalable Profits Are

Flexport founder Ryan Petersen recalled that during the company's Series B financing, a large VC questioned why it should receive a tech company valuation instead of a freight forwarder valuation.

Petersen immediately compared the trading multiples of Expeditors and Facebook using Google Finance, stating that Expeditors had a higher multiple that day; the VC subsequently did not invest. This case illustrates that "tech multiples" are not necessarily fixed above those of traditional industries.

Valuation multiples essentially represent a company's value divided by specific financial metrics. When comparing, it is essential to standardize the metrics: the price-to-earnings ratio corresponds to equity value and net profit, while EV/revenue or EV/EBITDA corresponds to enterprise value and operational metrics.

Traditional freight forwarders are usually valued based on EBITDA, with common transaction ranges around 3 to 7 times; however, scale, profit margins, customer concentration, cyclical position, cash conversion capability, and strategic synergies can significantly alter transaction prices.

Expeditors is not a low-quality freight forwarder; its asset-light model, global network, and long-term profitability allow its forward P/E ratio to reach about 23 to 24 times, higher than many peers in transportation and logistics.

In market mechanisms, VCs attempt to lower valuations using industry labels, while founders use comparable companies to demonstrate that labels are insufficient to determine capital costs. What is truly priced is the growth, stability, capital requirements, and competitive barriers of future free cash flows; the software identity only holds value when it can deliver higher gross margins, retention, and marginal profits.

Source: Public Information