I think company valuation is nuanced, depending both on the nature of the company itself, its business model, and the current financial environment.
Historically, mature profit-making companies trade at about 15X to 18X earnings (not revenue) in normal market conditions with normal interest rates (5% to 7%) and such. Today, however, mature zero-growth companies like AT&T and Exxon Mobil trade a bit higher than that at 18X (AT&T) to 21X (XOM) earnings. But they pay 5%+ dividend rates in a zero-to-negative interest rate environment, so high dividend-paying stocks will get bid up.
Similarly, mature software product companies traditionally traded for about 4X revenue. Software companies have great margins - zero cost of goods sold - but revenue and earnings are frequently lumpy, tied to software upgrade cycles. Enter the subscription SaaS business model, which makes earnings highly predictable, boosting revenue multiples to 6X to 10X and beyond. Back in the day, only anti-virus companies used subscription models, but today, Microsoft, Adobe, Quicken and everyone else are moving or have moved to the subscription model.
We also live in a time where many newer companies are in winner-take-all markets due to network effect or other exogenous conditions. For example, we all gravitate to a handful of social media companies such as Facebook and Instagram (also owned by Facebook), operating system companies such as Microsoft, Apple and Google (Android).
What are fast growing, network effects, near monopoly companies worth? Clearly way more than companies with lower barriers to entry, so fast growing, network effects companies get much higher bids.
In the old days, it took decades to build a network effect, winner-take-all companies such as the phone company AT&T and the utility companies. But with today's Internet companies, these competitive contests are settled much faster, taking years instead of decades to sort out.
As a entrepreneur, what would you do if you had a growing network effects company? I'd gobble up a bunch of capital and grow as fast as I possibly could without the wheels flying off, and that's exactly why you see companies staying private much longer.
Take sticky shopping cart companies such as Shopify, Square and Wix. While they theoretically have a lower barrier to entry, shopping carts are sticky; no merchant wants to swap out their shopping cart and catalog once it's been integrated into their website. So, it's a race to acquire as many customers as quickly as possible, and because of this rapid growth, valuations get bid up. You might scratch your head why earnings-less companies are so valuable, but in winner-takes-most businesses, it all makes sense.
For years, Chipotle Mexican Grill could recoup their investment in "A" model stores - the most common format they use today - in about 10-12 months. With economics that compelling, as CEO you'd reinvest every nickle of profit into new stores, which is exactly what they did (until the e-coli scare). Zero earnings, but stores and revenue growing like gangbusters and a market cap reflective of that growth.
As an investor, I've trained myself to investigate companies with sky-high valuations on the theory the market is telling me something. A good percentage of the time, you'll find a very fast-growing company.
We live in a time of great innovation and business models are evolving...