How would you value a company that is losing money?

I'd start by asking why it's losing money, because that decides the method. The first thing to say is which tools break. P/E doesn't work, because negative earnings give a negative multiple that means nothing. EV to EBITDA fails the same way if EBITDA is negative too. So for a growing company I'd move up the income statement to something positive. That's usually EV to revenue, using peers with similar growth. Second, I'd still do a DCF, but with a longer forecast. I'd project out until the company reaches steady margins, so the losses in the early years and the profits later are both in the numbers. Third, I'd check the unit economics, because they tell me whether the losses are an investment or a broken model. If it's a mature company in a temporary dip, I'd use multiples on normalized or forward earnings instead.

I'd start by asking why it's losing money, because that decides the method. A young company spending to grow is a different problem from a mature company in a bad year. The first thing to say is which tools break. P/E doesn't work, because negative earnings give a negative multiple that means nothing. EV to EBITDA fails the same way if EBITDA is negative too. So for a growing company I'd move up the income statement to something positive. That's usually EV to revenue, using peers with similar growth and similar gross margins, because revenue that keeps more gross profit is worth a higher multiple. Second, I'd still do a DCF, but with a longer forecast. I'd project out until the company reaches steady margins, so the losses in the early years and the profits later are both in the numbers. Most of the value will sit in the terminal value, so I'd show scenarios, not one number. Third, I'd check the unit economics, because they tell me whether the losses are an investment or a broken model. Say a customer costs $100 to win and brings in $300 of gross profit over their lifetime. That's $200 left per customer, or three times the cost, so the losses come from growing fast and should shrink as growth slows. If a customer brought in less than $100, more growth would mean bigger losses. I'd also check how long the cash lasts, since none of this matters if the company runs out first. If it's a mature company in a temporary dip, I'd use multiples on normalized or forward earnings instead. If it's in real distress, I'd look at what the assets would sell for. In every case I'd give a wide range and say what would move it.