Multiple of Revenues

"Multiple of Revenues" is a very back of the envelope method for valuing companies when they don't have tangible, steady, or stable earnings to make the traditional price to earnings ratios mean anything. So let's say a company is in its early stages of growth, and it has to invest tons of capital back into the business to buy marketing, retail space, product supplies or whatevers.  

Let's say this company makes adult entertainment devices (i.e. virtual reality head gear; get your minds out of the gutter). It had sales of $100 million last year and lost $5 million. This year, it will sell about $180 million and make about $2 million. Next year it believes (with many advance purchase contracts already in hand) that it will sell $300 million and have $70 million in pretax profits, or $45 million in after tax profits. It thinks it should sell for 20 times earnings then. 

Well, 20 times 45 is 900, or $900 million as the company's valuation, which is conveniently 3 times its 2 year out revenues.