[tfehring]

Because that represents cumulative revenue growth in the range of 100%-150% over three years (revenue was "over $100 million" in 2014 [0]) and it's not difficult to get to a high DCF valuation by (over?)extrapolating exponential growth at those types of rates. The absurd P/E ratio is arguably less relevant because expenses scale well for SaaS businesses.

Slightly more cynical answer: Big companies like SAP are bad at innovating, but their shareholders want to see growth. They have access to plenty of cheap capital, and buying companies that are actually innovating is one way to grow. Qualtrics and their bankers know this, and it means that they have all the leverage and can demand a premium. (Qualtrics's management may have also needed a premium to convince them to go work for SAP. I wouldn't blame them.) Also, there's a principal-agent problem: SAP's shareholders might be better off if SAP just returned the capital to them through dividends or buybacks and let them buy Qualtrics shares themselves, either in the private markets or after an eventual IPO. But SAP's management would rather manage a bigger company than a smaller one, and it doesn't look good for them to effectively throw up their hands and say they're all out of ideas.

I genuinely believe that there's some truth to both explanations, but your guess as to their relative importance is as good as mine.

[0] https://www.businessinsider.com/qualtrics-becomes-1-billion-...