Tech Chat – July 2026
Is everything bigger in the US?
We’ve all heard the stereotype that everything is bigger in the US: bigger cars, bigger houses, bigger stadiums, bigger portions, and for UK tech companies, seemingly bigger valuations. But is that really true?
In the tech valuation report we published last week, we look to answer questions that we’re regularly asked, like ‘why is US tech trading on over 4x EV/Sales while we’re trading on 1-2x’, and ‘would we be trading on a premium multiple if we were listed in the US instead of the UK?’.
Looking at the performance of the Nasdaq Composite compared to our Cavendish Tech indices, which reflect UK-listed tech companies with a market cap of under £1.5bn, Nasdaq has outperformed the Cavendish Tech indices by over 80% since June 2023. At the same time, 12-month-forward EV/Sales for the US index has increased to 5x vs our indices at 1-2x, and US P/E ratios have remained at 25-30x vs our indices at 15-20x.
In reality, the Nasdaq Composite is not that relevant for assessing how a UK tech company with a market cap of less than £1.5bn would trade in the US, as the Nasdaq Composite is market-cap weighted and includes tech companies with trillion-dollar market caps. So instead, we compare our UK tech universe to US tech companies with a market cap of less than £1.5bn.
The surprising finding is that US small-cap tech and our UK tech universe trade on remarkably similar EV/Sales, EV/EBITDA, EV/EBIT, and P/E, alongside similar forecast growth metrics, rule of 40, and forecast changes over the past year. US large-cap tech trades on substantial premiums across all these metrics – such as a median(!) of 12x EV/Sales for Nasdaq-100 tech companies, vs 1.3x and 1.5x in UK and US small-cap tech.
We then use relatively intuitive regression analysis to assess the importance of these factors, and find there is no significant difference in EV/Sales or P/E between US small-cap tech and UK tech when accounting for growth and forecast changes, and no significant difference in share price performance over the past year.
Instead, our analyses show that valuation and share price performance in small-cap tech are primarily linked to first upgrades, then to growth. As expected, downgrades typically weigh on both valuation and share price. For example, we find that following upgrades, Next Twelve Month (NTM) sales growth of +10% is associated with a +0.7x uplift to EV/Sales, with no significant relationship after downgrades. Looking at share price performance, a +10% sales upgrade is associated with +43% share price performance, while a +10% EBIT upgrade separately corresponds to a +8% share price uplift, with no significant relationship after downgrades.
This highlights that valuation is earned through delivery rather than geography. Companies should prioritise clear, achievable guidance and consistent outperformance, particularly following a downgrade, where credibility must be rebuilt before improved forecasts are reflected in valuation: once a company has been on the ‘naughty step’ it takes time to re-establish a reputation for reliable performance. While this may appear intuitive, with the economic turmoil of 2025 and 2026, 66% of UK tech companies reduced sales forecasts over the past year, and 59%, 48%, and 55% reduced EBITDA, EBIT, and EPS forecasts respectively.
So, while the market cap and valuations of some companies are clearly bigger in the US, for UK and US small-cap tech, there isn’t actually much difference. Instead, it turns out that a little British prudence may go down better than promising the world to investors. There’s a lot to be said for a well-cultivated British lawn and, as you could tell from some of the pitches in the World Cup, the grass probably isn’t greener on the other side.
Happy Friday