Rackspace reports after the close today, here are a couple things to look out for:
- An Expectations Multiple off of Guidance, Actual Revenue, or Actual Earnings.
- The Growth Rate in Managed Services Revenue
- Continued Reductions in SG&A Costs as a Share of Revenue
While y/y top line growth last quarter was in the low 20s, the company's current valuation of 74x annualized earnings is just above its 60% y/y growth in bottom line profitability. Continued reductions in its SG&A/Revenue ratio are essential to maintaining such a high valuation. Still, watch out for a sharp reaction on Tuesday if top line guidance surprises in any way.