When comparing revenue multiple to EBITDA, which type of companies typically use revenue multiples?

Revenue multiples are often used in valuations for companies that may not yet be generating profits, which includes those with negative profits. These kinds of companies still generate top-line revenue, allowing analysts and investors to assess their business potential and growth based on sales rather than profitability. For instance, startups and technology firms often focus on growth and market share rather than immediate profitability, making revenue multiples a more relevant metric than EBITDA.

On the other hand, companies with strong cash flows or that are mature and stable typically have positive earnings and may utilize both revenue multiples and EBITDA multiples in their valuations. Profit-generating companies would also likely favor EBITDA as a measure because it reflects their operational performance better than just revenue. Thus, revenue multiples are particularly suited for companies that might be in the early stages of their growth cycle, where traditional profit metrics don't fully capture their value.