For various reasons, discounted cash flows and option valuations are not easily applied to Internet companies. Far from being a new, innovative method for valuing Internet companies, relative multiples have been around for a long time. They're convenient, relatively easy to apply, fairly transparent and easily explained to laymen. But there are other reasons for its wide use in the Internet space. Not all Internet companies can be valued with earnings because, of course, not all have earnings.
Sales are a good indication of both Internet traffic and monetization of that traffic.
Every stock has a price, and almost every stock has revenue. End of problem, let's go home. Still, I won't fault a research report for using price to sales. View the printer friendly version. Inc. All rights reserved.