First of all why would you like to select the company having negative cash flows consistently (here I am assuming consistently means for duration of 3-5 years). It’s better to ignore them.
However, we can segregate them in 2 categories:
The newly established companies like Linked in, which does not have positive cash flows
The perennial loss making company like MTNL which has negative cash flows due to high fixed cost and are unable to recover them
Valuation will differ depending on the above types:
For the first type of company, ideally DCF should be used, but it is difficult to look in the future. Another thing which can be done is you estimate eps for next few years and multiply it by PE (general estimate), and then you discount the price by the discounting rate (a hurdle rate).
Other option is just valuing the company on tangible assets
2nd type of company:
No point of valuing it :) I wouldn’t. However if you want, you can value it on basis of liquidation value
It requires tremendous patience to get the correct appraisal from the market for these companies
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