When valuing a company with no profits, which multiples are commonly used instead of EV/Revenue or EV/EBITDA?

When valuing a company with no profits, which multiples are commonly used instead of EV/Revenue or EV/EBITDA?

• A. EV/Unique Visitors and EV/Pageviews
• B. P/E and P/BV
• C. EV/EBIT and EV/FCF
• D. EV/Net Income

Answer: (A)

When profits aren’t available, you value the business by what it can scale into rather than what it currently earns. Multiples tied to audience size and engagement—like EV/Unique Visitors and EV/Pageviews—are used because they proxy the potential revenue-generating capacity of an ad-supported or user-based model. They reflect how large an audience the company can monetize and how much value that audience represents, even if current profitability is zero or negative. The other options rely on profitability or cash flow (P/E, P/BV, EV/EBIT, EV/FCF, EV/Net Income) or on sales alone (EV/Revenue). When profits don’t exist yet, those metrics don’t provide meaningful comparisons, since they hinge on positive earnings or cash generation that isn’t present.

When profits aren’t available, you value the business by what it can scale into rather than what it currently earns. Multiples tied to audience size and engagement—like EV/Unique Visitors and EV/Pageviews—are used because they proxy the potential revenue-generating capacity of an ad-supported or user-based model. They reflect how large an audience the company can monetize and how much value that audience represents, even if current profitability is zero or negative.

The other options rely on profitability or cash flow (P/E, P/BV, EV/EBIT, EV/FCF, EV/Net Income) or on sales alone (EV/Revenue). When profits don’t exist yet, those metrics don’t provide meaningful comparisons, since they hinge on positive earnings or cash generation that isn’t present.