Dear
@Kristian333,
Valuation utilising revenue multiples is also known as the "Price To Sales Ratio", and is one of, but not the only metric used to value companies
that are not yet profitable ("yet" being the keyword, since in order to value a company in any other way than it's "Liquidation Value" or "Book Value" there must be belief or hope that it will indeed reach profitability at some point in time). See here for some brief info:
Valuation Formulas: Book Value & Liquidation Value. Other methods for valuing companies with negative earnings, are explained in this link:
Investopedia, which includes the following information:
"Twitter (TWTR), which went public in November 2013, priced its IPO shares at $26, or 12.4 times its estimated 2014 sales of $1.14 billion. In comparison, Facebook (FB) was then trading at a sales multiple of 11.6 times and LinkedIn (LNKD) was trading at a sales multiple of 12.2 times.
More info on the P/S Ratio can be found
here.
Amazon itself has never traded at a 15 or 20 times multiple to revenue, but at 4.5 times revenue at its highest. See
here. Value Investors will often look for companies with a PS ratio of between 1 and 2. Less than one is considered an excellent "bargain". As with all ratios they can vary significantly between industries and therefore should be compared to similar companies in the same industries. As
@Techmeister pointed out, companies expected to expand extremely fast can trade at high PS multiples. Much data is available online about the historical trends of PE & PS ratios through the various market cycles and is worthwhile keeping in mind if you are Value investing orientated.
Forward looking PE ratios are also often used for companies that are seen to be nearing profitability, but this is a forecast and not a fact like a PE ratio.
@Techmeister, As posted above in the thread, DTS are expecting average monthly recurring revenues to increase to $400 per store by the end of this calendar year, so that would double your projection values.
We certainly have a way to go but I think such values and beyond are a possibility in time, but I will feel more confident about that after the next 2 quarterlies. Regardless of fundamentals, I personally mostly enter and manage trades with a technical bias. I will not allow my position in DTS to turn into a loss, no matter how confident I am. The way I see it, I"ve been wrong before and will more than likely be again in the future and I generally am cautious to argue too strongly with Mr Market.
So far DTS is performing beautifully, especially amidst recent choppiness in the markets. I will be looking to add at every opportunity that allows me to manage my risk.
Apologies if some of the above is obvious to you.
Best of luck
