Rule of 40 Screener Excel: May 2026 SaaS Growth + Profitability Dashboard

Rule of 40 screener excel - if that phrase brought you here in May 2026, you are almost certainly trying to do one specific thing: tell which SaaS and cloud names are actually balancing growth with profit, and which are still relying on a single dimension to justify their multiple. This guide explains the framework, walks through the exact MarketXLS formulas that power each metric, and ships a premium dashboard-style template you can download, retarget, and stress test against your own risk tolerance.

Why a Rule of 40 Screener Matters in May 2026

The software cohort has spent eighteen months recalibrating. Through 2022 and into early 2024 the trade was simple: high growth was rewarded almost regardless of margin profile. That stopped working when interest rates moved higher and capital became expensive. By the start of 2025 the market had pivoted to demanding both growth and profitability from the same business, and the Rule of 40 framework went from a back-of-envelope check used by venture investors to a default lens for public-market analysts covering software.

A year and a half later, the cohort looks meaningfully different. The companies still scoring well above 40 percent are the ones that combined a durable demand engine with real operating leverage. The ones below 40 percent are the ones that either let growth slow without margin expansion to compensate, or scaled spend faster than revenue. With Q1 2026 earnings now reported and analyst estimates refreshed, this is a useful moment to run the screen across the cohort, see who passes, see who has slipped, and stress test the survivors against a softer macro.

That is what this Rule of 40 screener excel template does. It pulls live MarketXLS data on 20 cloud and SaaS names, computes a Rule of 40 score for each, and ranks them on a dashboard with KPI tiles, conditional formatting, and embedded charts. It also lets you switch the margin variant between Operating Margin and Free Cash Flow Margin, apply scenario haircuts to growth and margin, and size positions according to your risk tier.

What Is the Rule of 40

The Rule of 40 says that a software business is healthy when its revenue growth rate plus its profit margin reaches at least 40 percent. Below that line, the company is either not growing fast enough or not profitable enough to be considered durable for its valuation.

The framework is intentionally simple. Growth alone is not a thesis if the underlying business cannot make money. Margin alone is not a thesis if the topline is shrinking. The Rule of 40 forces both dimensions into a single number and lets you compare cohorts across a single axis.

There are two common margin variants in published research:

This template supports both. The Inputs sheet has a dropdown for Margin Variant. Pick Operating Margin if you want the classical Rule of 40 score. Pick FCF Margin if you care more about cash generation than accounting income.

The Universe: 20 Cloud and SaaS Names

The default universe is a 20-name set spanning the public software and cloud cohort. It is weighted toward large and mid-cap businesses that report consistent metrics and have long enough public history for the formulas to return reliable values. You can swap any ticker in the Dashboard sheet to retarget a different cohort, such as AI infrastructure, cybersecurity, or vertical SaaS.

The cohort as of May 2026 includes:

Tickers above are used to demonstrate how the MarketXLS formulas work. Their inclusion is not an investment recommendation.

The Approach: How the Score Is Built

The model computes Rule of 40 score for each name as:

Rule of 40 = Revenue Growth (%) + Profit Margin (%)

Where Profit Margin is either Operating Margin or FCF Margin based on the dropdown on the Inputs sheet. A name passes the screen when:

1. Its Rule of 40 score is at or above the threshold on the Inputs sheet (default 40)
2. Its revenue growth is at or above the minimum growth floor on the Inputs sheet (default 10 percent)

The second filter prevents the screen from rewarding a company that has stopped growing but still has a high margin profile. A pure margin story without a growth engine is not what the Rule of 40 is designed to identify.

Hypothesis, Not Forecast

It is worth saying this directly: the Rule of 40 is a heuristic, not a forecast. It tells you which businesses are operationally balanced today. It does not tell you what the stock will do next, whether the multiple is fair, or whether the growth is durable. Treat the score as a starting filter, not an answer.

MarketXLS Implementation

The template uses live MarketXLS formulas wherever possible. The key formulas, each verified against the MarketXLS function catalog:

=QM_Last("CRWD")                          ' Current stock price (live)
=MarketCapitalization("CRWD")             ' Market cap in dollars
=RevenueGrowth("CRWD")                    ' Annual revenue growth (decimal)
=QuarterlyRevenueGrowthYOY("CRWD")        ' Quarterly YoY growth (fallback)
=OperatingMargin("CRWD")                  ' Operating margin (decimal)
=LeveredFreeCashFlow("CRWD")              ' Levered free cash flow
=Revenue("CRWD")                          ' TTM revenue
=GrossMargin("CRWD")                      ' Gross margin (decimal)
=PriceToSales("CRWD")                     ' P/S ratio
=EnterpriseValueToRevenue("CRWD")         ' EV / Revenue multiple
=Sector("CRWD")                           ' GICS sector label
=Beta("CRWD")                             ' Beta versus market

Each formula returns a single scalar that the workbook then composes into the Rule of 40 score, the screener status flag, and the comparison metrics across sheets. The formulas update on workbook open and through the MarketXLS refresh ribbon, so the screen stays current without manual edits.

For the Rule of 40 calculation itself the formula is:

=F11 + IF(MarginVariant="FCF Margin", H11, G11)

Where F11 is revenue growth, G11 is operating margin, and H11 is FCF margin. MarginVariant is a named range pointing at the dropdown on the Inputs sheet, so toggling the dropdown updates every score across the workbook.

The pass / fail flag uses:

=IF(AND(I11>=MinRuleOf40, F11>=MinRevGrowth), "PASS", "FAIL")

Again using named ranges from the Inputs sheet, so a change to the thresholds flows through immediately.

What's Inside the Template

The workbook is built as a premium, dashboard-style template with 10 sheets. Each one has a specific role.

1. Cover. Branded title page with the version number, date, table of contents, and a one-sentence description of what the template does. Hidden gridlines, navy banner, gold accents. This is the page that opens when the file is launched.

2. How To Use. Numbered tutorial walking through the eight steps from opening the Inputs sheet to reading the Methodology. Each step has a one-line head and a body sentence. The bottom of the sheet links back to marketxls.com and to the function documentation.

3. Dashboard. The headline sheet. A row of KPI tiles across the top reports universe size, number of names passing the screen, median Rule of 40 score, and the top scoring ticker. Below the tiles is the screener table with all 20 names, color-scale heatmap on each numeric column, data bars on market cap, and PASS / FAIL flag with green and red fill. To the right of the screener are two embedded charts: a horizontal bar chart ranking names by Rule of 40 score, and a scatter chart that maps revenue growth against operating margin for every name in the cohort. The dashboard has hidden gridlines and a print area set for landscape one-page output.

4. Inputs. Yellow-highlighted input cells with bold borders. Six inputs in total: Portfolio Size, Scenario, Risk Tier, Margin Variant, Minimum Rule of 40 threshold, Minimum Revenue Growth, and Maximum Position percent. Three dropdowns enforce valid choices through data validation. Below the inputs are two reference tables: Scenario Adjustments and Risk Tier Position Sizing, both used elsewhere in the workbook.

5. Scenario Analysis. A 5x5 sensitivity grid that shows how many names still pass the screen as growth and margin haircuts vary from negative 30 percent to positive 20 percent. A three-color heatmap across the grid makes the cohort's sensitivity visible at a glance. Below the grid is a Headline Scenarios table that summarizes five named scenarios: Stress, Cautious, Base, Tailwind, and Boom, each with a one-line read on what passes under that scenario.

6. Strategy. A factor weights table that breaks the composite score into its underlying signals: Revenue Growth, Operating Margin, FCF Margin, Rule of 40 Composite, and EV/Revenue penalty. Each factor has a weight, a direction, a threshold, the MarketXLS source formula, and a one-sentence rationale. Below the weights is an Entry, Exit, and Rebalancing rules table that codifies how the strategy is supposed to be run.

7. Portfolio. Position sizing for the top 12 names ranked by Rule of 40 score. Each row shows the rank, ticker, name, score, weight, dollar capital, price, share count, and allocation. A donut chart on the right visualizes the allocation. Totals at the bottom reconcile to the portfolio size from the Inputs sheet, with the residual rolling into a Cash / Reserve line.

8. Comparison. A pivoted view that puts the top 8 names across columns and the metrics down rows. Each metric row has its own color scale across the 8 names so you can read leaders and laggards on each dimension. Metrics covered: company, price, market cap, revenue growth, operating margin, FCF margin, gross margin, P/S, EV/Revenue, and Rule of 40.

9. Methodology. A one-page explainer covering the origin of the rule, the formula, universe selection criteria, data sources, scenario mechanics, position sizing logic, limitations, and an educational note. Built to lift perceived value and to be the page someone can point at when asked how the model works.

10. Glossary & Disclaimer. Definitions for every term used in the workbook, plus the educational-use disclaimer.

Every sheet has frozen panes, a tab color, and a footer line that links to marketxls.com and the demo booking page. Every sheet that calls MarketXLS functions has a "Functions Used In This Sheet" box at the bottom that lists the exact formulas with a one-line description.

Reading the Dashboard

The KPI tile row is built to be the first thing the eye lands on. Four tiles, each labeled in muted uppercase with a large value below in navy. The values update as the Inputs change.

Below the tiles, the screener table is sorted in the order of the universe input, not by rank, so you can audit the cohort top to bottom without losing the ticker reference. The color-scale conditional formatting then makes the ranking visible without sorting. Revenue Growth, Operating Margin, FCF Margin, and Rule of 40 all carry red-to-green color scales. Market cap carries a data bar so you can read magnitude at a glance.

The PASS / FAIL column flips between green and red based on whether the row clears both thresholds. Combined with the color-scale columns to its left, you can see immediately which passes are high-conviction passes and which are marginal.

The two charts on the right of the screener give you the same information in a different lens. The bar chart ranks names by Rule of 40 score from top to bottom. The scatter chart maps growth against margin so you can see the cohort spread visually: top right is the Rule of 40 sweet spot, bottom left is the danger zone, top left is growth-without-profit, bottom right is profit-without-growth.

How Scenario Analysis Works

The Scenario Analysis sheet asks a simple question: if growth slows by some percent and margin compresses by some percent, how many of the 20 names still pass the screen? The 5x5 grid answers that question across every combination of growth haircut and margin haircut from negative 30 percent to positive 20 percent.

The headline scenarios table simplifies this into five named cases. The Stress case applies 30 percent growth haircut and 20 percent margin haircut and reports how many names still survive. The Cautious case is milder. Base is reported figures. Tailwind and Boom are upside cases.

If your portfolio is built around the Rule of 40 framework, the Stress case is the most informative cell on the sheet. A cohort that survives a 30 percent growth haircut with the screen still intact is a fundamentally different cohort than one where the screen empties out under any meaningful stress.

Position Sizing on the Portfolio Sheet

The Portfolio sheet takes the top 12 names from the Rule of 40 ranking and sizes them based on the user's Risk Tier setting. Each tier has different defaults:

The maximum position is also capped by the Max Position percent on the Inputs sheet, so even an Aggressive tier cannot let a single position blow past your concentration limit.

The donut chart on the right of the portfolio table is rebuilt from the weights column. If a user reweights or removes a name, the chart updates with the change. A Cash / Reserve row at the bottom absorbs any residual not deployed.

The Comparison Sheet

The Comparison sheet flips the orientation of the Dashboard. Instead of names across rows and metrics across columns, it puts the top 8 names across columns and the metrics down rows. The benefit is that each metric row gets its own conditional formatting, so you can read leaders and laggards on each dimension without sorting.

This view is particularly useful when you have a shortlist and want to triangulate which name to favor. If two names have similar Rule of 40 scores, the Comparison sheet lets you see at a glance which one has the better gross margin, the lower P/S, or the higher FCF margin.

Limitations You Should Know

The Rule of 40 is a heuristic, not a model. Specific things it does not handle:

• Sustainability of growth. A 30 percent growth rate this year does not mean 30 percent next year. A name passing the screen on a one-off accelerator may not pass next year. Use forward analyst estimates as a sanity check.
• Capital structure. Two names with the same Rule of 40 score can have different leverage profiles. A highly levered name has more downside if growth slows. The template flags EV/Revenue as a penalty factor but does not weight leverage directly.
• Industry cycle. Different software sub-segments have different growth ceilings. Mature platforms grow more slowly than emerging categories. The framework does not adjust for this.
• Unit economics. A name with strong growth but bad unit economics can pass the screen and still be the wrong business to own. CAC payback, net retention, and gross margin trajectory all matter beyond the headline score.
• Multiple compression risk. The Rule of 40 says nothing about valuation. A name passing the screen at 25x EV/Revenue is still vulnerable to multiple compression if the broader software multiple resets.

This is why the template includes a Strategy sheet with an explicit EV/Revenue penalty factor and a Methodology sheet that calls out limitations. The score is a starting filter, not an answer.

Download the Templates

Download the templates:

• - Static values pre-filled, every data cell carries a comment showing the MarketXLS formula that produced it.
• - Live formulas across every sheet, updates on workbook open.

Both files are the same dashboard-grade design: cover page, KPI tiles, embedded charts, conditional formatting, dropdowns, frozen panes, and a methodology page. The sample is faster to open and is useful if you want to inspect the design before connecting MarketXLS. The template version requires MarketXLS installed and updates live.

How To Customize the Universe

The 20-name universe is a default, not a constraint. To retarget the screen at a different cohort:

1. Open the Dashboard sheet.
2. Edit the tickers in column B, rows 11 to 30. Every formula across the workbook references the ticker in column B for its row, so updating the ticker rewires every metric.
3. Update the name in column C if you want the dashboard to show your label.
4. Reopen the file or hit refresh on the MarketXLS ribbon. The Rule of 40 score, the PASS / FAIL flag, the ranking, the charts, and the Portfolio sizing all update.

Some useful cohorts to test:

• AI infrastructure pure plays. NVDA, AMD, AVGO, ANET, MRVL, MU, SMCI, ARM. The Rule of 40 framework was designed for SaaS, but it can be informative when applied to other recurring-revenue cohorts.
• Cybersecurity-only set. CRWD, PANW, FTNT, ZS, OKTA, NET, CYBR, RPD, S, TENB.
• Vertical SaaS. TYL, VEEV, PCTY, PAYC, GLBE, BSY, HUBS.
• AI-native cohort. PLTR, AI, SOUN, BBAI, IONQ, RGTI.

Each cohort will pass the screen at a different rate and at different thresholds. The Inputs sheet lets you reset the Rule of 40 minimum and the Revenue Growth minimum to match the cohort.

Rebalancing Cadence

Rule of 40 metrics turn over slowly. Revenue growth and operating margin are reported quarterly, and meaningful changes take more than one quarter to confirm. The Strategy sheet recommends a quarterly rebalance:

• After each earnings season, refresh the workbook and rerun the screen.
• Drop any name that has failed the screen for two consecutive quarters.
• Redistribute the freed capital to the top decile of names still passing the screen.
• Resize positions according to the Risk Tier on the Inputs sheet, capped by the Max Position percent.

Monthly rebalancing is overkill for this framework. Quarterly is the natural cadence given how the underlying data refreshes.

FAQ

What does a Rule of 40 score actually mean?

It is the sum of revenue growth rate and profit margin, both expressed as percents. A score at or above 40 means the company is balanced between growth and profitability. A score below 40 means it is either not growing fast enough or not profitable enough to be considered durable. The framework is a heuristic, not a forecast, and is most informative when compared across a peer cohort rather than as an absolute number.

Should I use Operating Margin or FCF Margin in the score?

It depends on the stage of the business. Operating Margin works for mid-stage SaaS where GAAP profitability is the relevant benchmark. FCF Margin works better for mature SaaS where cash conversion is the more informative measure of operational quality. This template lets you toggle between the two on the Inputs sheet. Many published analyses default to FCF Margin for the public software cohort.

How often should I refresh the data?

The template is built around live MarketXLS formulas, so values refresh whenever you open the workbook or click the refresh button on the MarketXLS ribbon. For practical use, refresh after each earnings season once new quarterly metrics are reported. Monthly or weekly refresh is fine but not necessary given the cadence of the underlying data.

Can I use this template for non-SaaS companies?

The Rule of 40 was designed for SaaS, where recurring revenue, high gross margin, and operating leverage are inherent. Applying it to non-SaaS cohorts is possible but should be done with caution. Industrial businesses, banks, and energy companies have different growth and margin profiles, and the 40 percent threshold may not be meaningful. The template will run the calculation against any ticker that MarketXLS supports; interpretation is on the user.

What is the difference between the sample and template files?

The sample file has static values pre-filled, with every data cell carrying a comment that shows the MarketXLS formula that would produce that value. It opens fast and does not require MarketXLS installed. The template file has live MarketXLS formulas in every data cell. Both files have the same premium design, charts, conditional formatting, and methodology pages.

Why are some FCF margin values missing for certain names?

LeveredFreeCashFlow can be unavailable for companies that have not reported the cash flow statement recently or where free cash flow is structurally negative. The template wraps the FCF margin formula in an IFERROR that returns a dash in those cases. Operating Margin is more consistently available across the cohort and is the default margin variant for that reason.

How does the scenario stress test work?

The Scenario Analysis sheet applies a multiplicative haircut to each name's growth and margin, then re-runs the screen with the adjusted values. A negative 30 percent growth haircut means each name's growth is multiplied by 0.7. A positive 20 percent margin haircut means each margin is multiplied by 1.2. The grid shows the count of names that still pass the screen under every combination of haircuts.

The Bottom Line

The Rule of 40 framework is one of the cleanest single-number filters available for the software cohort. It rewards businesses that combine growth with profit and penalizes ones that lean on one dimension without the other. It is not a forecast, and it is not a substitute for understanding the underlying unit economics, but it is a useful starting point for separating the durable businesses from the rest.

This Rule of 40 screener excel dashboard is built to do that work in one workbook. KPI tiles to summarize. A screener table with conditional formatting to rank. Scenario analysis to stress test. Portfolio sizing to translate the screen into a position list. Comparison and methodology to defend the output.

To put the template to work, for a quick look at the design, or if you have MarketXLS installed and want the data to refresh on open.

To go beyond the screen, MarketXLS gives you the function library that powers it. Explore the MarketXLS platform to see how the same formulas can drive earnings models, dividend trackers, options screeners, and risk dashboards from a single Excel-native workbench. If you would like a walkthrough on how to apply the framework to your specific cohort, book a demo and the team will tailor the workflow to your use case.