How would you value a company with negative EBITDA, and what multiples would you use?

Question

IBPrep · Accepted Answer

With negative EBITDA, an EV/EBITDA multiple is meaningless, so move up the income statement to multiples based on lines above EBITDA, as long as that denominator is positive.

The usual choices are EV/EBIT (if EBIT is positive) and, failing that, EV/Revenue (EV/Sales).

How would you value a company with negative EBITDA, and what multiples would you use?

Answer

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