I’m trying to value a company with little revenue but with huge market potential (t=$200k; t+5=$50M). I don’t want to get bogged down in trying to build out a DCF model that would simply be guessing at the end of the day. So, I was thinking of discounting the sum of implied revenue dividing this by diluted shares and multiplying by EV/sales multiple to develop a Implied Share Price.
Is this logic/valuation wrong in anyway?
Of course I’d also include an input for TV.
Has the company had any recent capital raises that could be used as a benchmark for value? Early stage companies are typically valued two ways, (i) DCF and (ii) prior transactions. You mention a terminal value, for which you will need to estimate a revenue/EBITDA/other amount, which will be far more important to your DCF than the annual cash inflows/outflows for the next 5 years.
They had a recent capital raise of $10.50 a share and will be selling 8.5 million shares with an option to sell 1.275 to the underwriters.
I usually just do DCF on forecasted revenue (yeah, it’s all made up), maybe probability-weight various cashflow outcomes.
Are you trying to value it or determine the price it should sell at? These are two different ways to arrive at a number. Sounds like you’re looking to price it
Yah, I just went ahead with a DCF model. It’s publicly traded but a one product company with huge revenue potential once it starts educating customers.