In a scenario where a company with a stable revenue history recently experienced operating losses, which EV/Revenue multiple is realistic?

In this scenario, selecting a low EV/Revenue multiple of 0.6x is realistic given that the company has a stable revenue history but is currently experiencing operating losses. The EV/Revenue multiple effectively reflects investor sentiment about a company's future prospects and the perceived risk associated with it.

When a company faces operating losses, it typically signals potential issues with its business model, operational efficiency, or market conditions, which can lead to lower confidence from investors. A lower multiple indicates that investors are valuing the company conservatively, considering the potential risks related to future profitability and stability.

Moreover, a stable revenue history suggests some underlying resilience, but the losses indicate that this stability may not translate into future performance, thereby warranting a cautious approach to valuation. The multiples reflect not only current performance but also potential future outcomes; hence, a multiple of 0.6x captures the need for a discounted view on the company's current revenue relative to its losses and risk profile.

This reasoning aligns with typical valuation practices where lower multiples are applied to companies facing operational challenges, despite stable revenue figures. Consequently, selecting a multiple of 0.6x appropriately addresses both the company's risks and its revenue stability.