I'd say there are three basic tiers of valuation, depending on the degree of owner involvement.
Tier one is a one man band. Even shops with a few employees fall into this tier. The owner is quoting, programming, setting up, often operating, acting as quality control and everything else. You might have a few operators putting parts in and taking parts out. Without the owner, this shop is worth the value of the machines, minus any transferred debt. This is a collection of machines, not an investable business.
Tier two is run by the owner, but major functional blocks are systematize enough and independent enough that the owner isn't doing everything. This shop has a sales department, and a front office, and a foreman, and a few real machinists, and probably some operators. This shop can still only be purchased by someone with the specialized knowledge to run it, whether that someone is a machinist or an engineer or a sales guy or what have you. The question for an investor is "what value can I add to this shop?" Sales are probably between a million and ten million dollars per year. Here I'd say you're looking at the value of the machines, minus any debt, plus 2x-5x the shop's gross profits. I'd argue total turnover doesn't matter to valuation.
Tier three is a turn-key operation. The shop is run by someone who is not the owner, operates as a fully self-sufficient operation, has operated as such for a significant length of time and is in a stable area. There's a general manager, a sales manager, a production supervisor, several foremen, an office manager. This business owns its location or has a long term lease. Turnover is probably between ten and a hundred million dollars per year. Anybody with cash could buy this business and make money. This business is worth between five and ten times its annual gross profit, plus the value of machines, minus debt.
I'd argue that contracts NEVER matter. All a contract says is "this business will probably continue to do what it is doing." In tier one, that doesn't matter because there's no value in the continuing operations, just the machines. In tiers 2 and 3, continuing to make money is why you are paying for the continuing operations in the first place.
A company with a product line values just about the same way, they just should have a better profit margin in tiers 2 and 3. Same for patents and IP. If there's a protectable revenue stream, then that should be showing up in the bottom line. If it doesn't, then how is it worth paying for?
For what it's worth, by these metrics my company is in tier 2 and is worth between ten and 18 million dollars. We have 19 employees, seven CNC machines, 22 other automated machines and robots, one granted patent and four pending, two product lines, and we make about 700,000 parts per year. I wouldn't sell it for that, but I accept that that is what it is objectively worth.