Intrinsic value of Valeant Pharmaceuticals International In - VRX

Previous Close

$18.80

  Intrinsic Value

$21.77

stock screener

  Rating & Target

hold

+16%

Previous close

$18.80

 
Intrinsic value

$21.77

 
Up/down potential

+16%

 
Rating

hold

We calculate the intrinsic value of VRX stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 6.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -7.40
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  13,070
  13,331
  13,638
  13,989
  14,382
  14,818
  15,296
  15,817
  16,381
  16,989
  17,641
  18,338
  19,083
  19,875
  20,717
  21,611
  22,558
  23,560
  24,621
  25,741
  26,923
  28,171
  29,488
  30,875
  32,336
  33,876
  35,497
  37,203
  38,998
  40,887
  42,873
Variable operating expenses, $m
 
  11,369
  11,581
  11,824
  12,097
  12,399
  12,730
  13,091
  13,482
  13,903
  14,354
  12,704
  13,219
  13,768
  14,352
  14,971
  15,627
  16,321
  17,056
  17,831
  18,651
  19,515
  20,427
  21,388
  22,401
  23,467
  24,590
  25,772
  27,015
  28,324
  29,700
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  13,835
  11,369
  11,581
  11,824
  12,097
  12,399
  12,730
  13,091
  13,482
  13,903
  14,354
  12,704
  13,219
  13,768
  14,352
  14,971
  15,627
  16,321
  17,056
  17,831
  18,651
  19,515
  20,427
  21,388
  22,401
  23,467
  24,590
  25,772
  27,015
  28,324
  29,700
Operating income, $m
  -765
  1,962
  2,057
  2,164
  2,285
  2,419
  2,566
  2,726
  2,900
  3,086
  3,287
  5,635
  5,863
  6,107
  6,366
  6,640
  6,931
  7,239
  7,565
  7,909
  8,273
  8,656
  9,061
  9,487
  9,936
  10,409
  10,907
  11,431
  11,983
  12,563
  13,174
EBITDA, $m
  3,107
  6,329
  6,474
  6,641
  6,828
  7,035
  7,262
  7,509
  7,777
  8,065
  8,375
  8,706
  9,059
  9,435
  9,835
  10,259
  10,709
  11,185
  11,688
  12,220
  12,781
  13,374
  13,999
  14,657
  15,351
  16,082
  16,851
  17,661
  18,514
  19,410
  20,353
Interest expense (income), $m
  2,321
  2,258
  2,190
  2,259
  2,337
  2,425
  2,523
  2,630
  2,747
  2,873
  3,009
  3,155
  3,311
  3,478
  3,656
  3,844
  4,045
  4,257
  4,481
  4,719
  4,970
  5,235
  5,514
  5,809
  6,120
  6,447
  6,792
  7,155
  7,537
  7,939
  8,362
Earnings before tax, $m
  -3,290
  -296
  -133
  -94
  -52
  -6
  43
  96
  153
  213
  277
  2,480
  2,552
  2,629
  2,710
  2,796
  2,887
  2,983
  3,084
  3,191
  3,303
  3,422
  3,546
  3,678
  3,816
  3,962
  4,115
  4,276
  4,446
  4,624
  4,811
Tax expense, $m
  -37
  0
  0
  0
  0
  0
  12
  26
  41
  58
  75
  669
  689
  710
  732
  755
  779
  805
  833
  861
  892
  924
  958
  993
  1,030
  1,070
  1,111
  1,155
  1,200
  1,248
  1,299
Net income, $m
  -3,255
  -296
  -133
  -94
  -52
  -6
  32
  70
  112
  156
  202
  1,810
  1,863
  1,919
  1,978
  2,041
  2,107
  2,177
  2,251
  2,329
  2,411
  2,498
  2,589
  2,685
  2,786
  2,892
  3,004
  3,122
  3,245
  3,375
  3,512

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  732
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  58,811
  59,251
  60,613
  62,171
  63,920
  65,858
  67,984
  70,300
  72,806
  75,506
  78,404
  81,504
  84,811
  88,333
  92,077
  96,048
  100,258
  104,713
  109,425
  114,403
  119,660
  125,207
  131,056
  137,221
  143,718
  150,560
  157,763
  165,346
  173,325
  181,719
  190,548
Adjusted assets (=assets-cash), $m
  58,079
  59,251
  60,613
  62,171
  63,920
  65,858
  67,984
  70,300
  72,806
  75,506
  78,404
  81,504
  84,811
  88,333
  92,077
  96,048
  100,258
  104,713
  109,425
  114,403
  119,660
  125,207
  131,056
  137,221
  143,718
  150,560
  157,763
  165,346
  173,325
  181,719
  190,548
Revenue / Adjusted assets
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
Average production assets, $m
  30,211
  30,809
  31,517
  32,327
  33,237
  34,244
  35,350
  36,554
  37,857
  39,261
  40,768
  42,380
  44,100
  45,931
  47,877
  49,943
  52,131
  54,448
  56,898
  59,487
  62,220
  65,104
  68,146
  71,352
  74,730
  78,287
  82,033
  85,976
  90,124
  94,489
  99,080
Working capital, $m
  1,983
  1,280
  1,309
  1,343
  1,381
  1,423
  1,468
  1,518
  1,573
  1,631
  1,694
  1,760
  1,832
  1,908
  1,989
  2,075
  2,166
  2,262
  2,364
  2,471
  2,585
  2,704
  2,831
  2,964
  3,104
  3,252
  3,408
  3,571
  3,744
  3,925
  4,116
Total debt, $m
  40,332
  39,106
  40,332
  41,734
  43,308
  45,052
  46,966
  49,050
  51,305
  53,735
  56,343
  59,133
  62,110
  65,280
  68,649
  72,224
  76,012
  80,022
  84,262
  88,743
  93,474
  98,466
  103,730
  109,279
  115,126
  121,284
  127,767
  134,591
  141,772
  149,327
  157,273
Total liabilities, $m
  54,553
  53,326
  54,552
  55,954
  57,528
  59,272
  61,186
  63,270
  65,525
  67,955
  70,563
  73,353
  76,330
  79,500
  82,869
  86,444
  90,232
  94,242
  98,482
  102,963
  107,694
  112,686
  117,950
  123,499
  129,346
  135,504
  141,987
  148,811
  155,992
  163,547
  171,493
Total equity, $m
  4,259
  5,925
  6,061
  6,217
  6,392
  6,586
  6,798
  7,030
  7,281
  7,551
  7,840
  8,150
  8,481
  8,833
  9,208
  9,605
  10,026
  10,471
  10,942
  11,440
  11,966
  12,521
  13,106
  13,722
  14,372
  15,056
  15,776
  16,535
  17,332
  18,172
  19,055
Total liabilities and equity, $m
  58,812
  59,251
  60,613
  62,171
  63,920
  65,858
  67,984
  70,300
  72,806
  75,506
  78,403
  81,503
  84,811
  88,333
  92,077
  96,049
  100,258
  104,713
  109,424
  114,403
  119,660
  125,207
  131,056
  137,221
  143,718
  150,560
  157,763
  165,346
  173,324
  181,719
  190,548
Debt-to-equity ratio
  9.470
  6.600
  6.650
  6.710
  6.780
  6.840
  6.910
  6.980
  7.050
  7.120
  7.190
  7.260
  7.320
  7.390
  7.460
  7.520
  7.580
  7.640
  7.700
  7.760
  7.810
  7.860
  7.910
  7.960
  8.010
  8.060
  8.100
  8.140
  8.180
  8.220
  8.250
Adjusted equity ratio
  0.061
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -3,255
  -296
  -133
  -94
  -52
  -6
  32
  70
  112
  156
  202
  1,810
  1,863
  1,919
  1,978
  2,041
  2,107
  2,177
  2,251
  2,329
  2,411
  2,498
  2,589
  2,685
  2,786
  2,892
  3,004
  3,122
  3,245
  3,375
  3,512
Depreciation, amort., depletion, $m
  3,872
  4,366
  4,418
  4,476
  4,542
  4,615
  4,695
  4,783
  4,877
  4,979
  5,088
  3,071
  3,196
  3,328
  3,469
  3,619
  3,778
  3,946
  4,123
  4,311
  4,509
  4,718
  4,938
  5,170
  5,415
  5,673
  5,944
  6,230
  6,531
  6,847
  7,180
Funds from operations, $m
  2,671
  4,071
  4,284
  4,382
  4,490
  4,609
  4,727
  4,853
  4,989
  5,134
  5,291
  4,881
  5,059
  5,247
  5,448
  5,660
  5,885
  6,123
  6,374
  6,640
  6,920
  7,215
  7,527
  7,855
  8,201
  8,565
  8,948
  9,352
  9,776
  10,222
  10,692
Change in working capital, $m
  -149
  25
  29
  34
  38
  42
  46
  50
  54
  58
  63
  67
  71
  76
  81
  86
  91
  96
  102
  108
  114
  120
  126
  133
  140
  148
  156
  164
  172
  181
  191
Cash from operations, $m
  2,820
  4,046
  4,255
  4,349
  4,453
  4,567
  4,681
  4,803
  4,935
  5,076
  5,228
  4,814
  4,987
  5,171
  5,367
  5,574
  5,794
  6,027
  6,273
  6,532
  6,806
  7,096
  7,401
  7,722
  8,061
  8,417
  8,793
  9,188
  9,604
  10,041
  10,501
Maintenance CAPEX, $m
  0
  -2,189
  -2,233
  -2,284
  -2,343
  -2,408
  -2,481
  -2,562
  -2,649
  -2,743
  -2,845
  -2,954
  -3,071
  -3,196
  -3,328
  -3,469
  -3,619
  -3,778
  -3,946
  -4,123
  -4,311
  -4,509
  -4,718
  -4,938
  -5,170
  -5,415
  -5,673
  -5,944
  -6,230
  -6,531
  -6,847
New CAPEX, $m
  -393
  -598
  -709
  -810
  -909
  -1,008
  -1,106
  -1,204
  -1,303
  -1,404
  -1,507
  -1,612
  -1,720
  -1,831
  -1,946
  -2,065
  -2,189
  -2,317
  -2,450
  -2,589
  -2,733
  -2,884
  -3,042
  -3,206
  -3,378
  -3,558
  -3,746
  -3,943
  -4,149
  -4,365
  -4,591
Cash from investing activities, $m
  -169
  -2,787
  -2,942
  -3,094
  -3,252
  -3,416
  -3,587
  -3,766
  -3,952
  -4,147
  -4,352
  -4,566
  -4,791
  -5,027
  -5,274
  -5,534
  -5,808
  -6,095
  -6,396
  -6,712
  -7,044
  -7,393
  -7,760
  -8,144
  -8,548
  -8,973
  -9,419
  -9,887
  -10,379
  -10,896
  -11,438
Free cash flow, $m
  2,651
  1,259
  1,314
  1,255
  1,201
  1,151
  1,094
  1,037
  983
  929
  876
  248
  196
  144
  92
  40
  -14
  -68
  -123
  -180
  -237
  -297
  -359
  -422
  -488
  -555
  -626
  -699
  -775
  -854
  -937
Issuance/(repayment) of debt, $m
  -1,643
  -1,217
  1,226
  1,402
  1,574
  1,744
  1,914
  2,084
  2,256
  2,430
  2,608
  2,790
  2,977
  3,170
  3,369
  3,575
  3,788
  4,010
  4,241
  4,481
  4,731
  4,992
  5,264
  5,549
  5,847
  6,158
  6,483
  6,824
  7,181
  7,555
  7,946
Issuance/(repurchase) of shares, $m
  45
  2,685
  270
  250
  227
  200
  181
  161
  139
  114
  87
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -2,652
  1,468
  1,496
  1,652
  1,801
  1,944
  2,095
  2,245
  2,395
  2,544
  2,695
  2,790
  2,977
  3,170
  3,369
  3,575
  3,788
  4,010
  4,241
  4,481
  4,731
  4,992
  5,264
  5,549
  5,847
  6,158
  6,483
  6,824
  7,181
  7,555
  7,946
Total cash flow (excl. dividends), $m
  -74
  2,726
  2,810
  2,907
  3,002
  3,095
  3,189
  3,283
  3,377
  3,473
  3,571
  3,038
  3,173
  3,314
  3,461
  3,614
  3,775
  3,942
  4,118
  4,301
  4,493
  4,695
  4,906
  5,127
  5,359
  5,602
  5,857
  6,125
  6,406
  6,700
  7,009
Retained Cash Flow (-), $m
  3,727
  -2,685
  -270
  -250
  -227
  -200
  -213
  -232
  -251
  -270
  -290
  -310
  -331
  -352
  -374
  -397
  -421
  -446
  -471
  -498
  -526
  -555
  -585
  -617
  -650
  -684
  -720
  -758
  -798
  -839
  -883
Prev. year cash balance distribution, $m
 
  723
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  764
  2,540
  2,657
  2,775
  2,895
  2,976
  3,051
  3,127
  3,203
  3,282
  2,728
  2,842
  2,962
  3,087
  3,217
  3,354
  3,497
  3,646
  3,803
  3,968
  4,140
  4,321
  4,511
  4,709
  4,918
  5,137
  5,367
  5,608
  5,861
  6,127
Discount rate, %
 
  13.50
  14.18
  14.88
  15.63
  16.41
  17.23
  18.09
  19.00
  19.95
  20.94
  21.99
  23.09
  24.24
  25.46
  26.73
  28.07
  29.47
  30.94
  32.49
  34.11
  35.82
  37.61
  39.49
  41.47
  43.54
  45.72
  48.00
  50.40
  52.92
  55.57
PV of cash for distribution, $m
 
  673
  1,949
  1,752
  1,552
  1,354
  1,147
  953
  778
  623
  490
  306
  235
  176
  129
  92
  64
  43
  28
  18
  11
  7
  4
  2
  1
  1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  66.9
  65.0
  63.3
  61.8
  60.6
  59.5
  58.6
  57.8
  57.3
  56.8
  56.8
  56.8
  56.8
  56.8
  56.8
  56.8
  56.8
  56.8
  56.8
  56.8
  56.8
  56.8
  56.8
  56.8
  56.8
  56.8
  56.8
  56.8
  56.8
  56.8

Valeant Pharmaceuticals International, Inc. is a pharmaceutical and medical device company. The Company is engaged in developing and marketing a range of branded, generic and branded generic pharmaceuticals, over-the-counter (OTC) products, and medical devices (contact lenses, intraocular lenses, ophthalmic surgical equipment, and aesthetics devices). It operates through two segments: Developed markets and Emerging markets. In the Developed Markets segment, it focuses on the areas of dermatology, neurology, gastrointestinal disorders, and eye health therapeutic classes. In the Emerging Markets segment, it focuses on primarily on branded generics, OTC products and medical devices. Its pharmaceutical products include Xifaxan, Solodyn and Glumetza. Its OTC products include PreserVision, Biotrue and Boston. Its other generic products include Latanoprost and Metronidazole. Its ophthalmic surgical products include intraocular lenses, such as Akreos, enVista, Crystalens and Trulign.

FINANCIAL RATIOS  of  Valeant Pharmaceuticals International In (VRX)

Valuation Ratios
P/E Ratio -2
Price to Sales 0.5
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 2.3
Price to Free Cash Flow 2.7
Growth Rates
Sales Growth Rate -7.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -3.9%
Cap. Spend. - 3 Yr. Gr. Rate 9.5%
Financial Strength
Quick Ratio 81
Current Ratio 0.1
LT Debt to Equity 946.8%
Total Debt to Equity 947%
Interest Coverage 0
Management Effectiveness
Return On Assets -1.5%
Ret/ On Assets - 3 Yr. Avg. 3.4%
Return On Total Capital -6.9%
Ret/ On T. Cap. - 3 Yr. Avg. -1.3%
Return On Equity -53.2%
Return On Equity - 3 Yr. Avg. -13.8%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 73%
Gross Margin - 3 Yr. Avg. 73.7%
EBITDA Margin 22.2%
EBITDA Margin - 3 Yr. Avg. 33.5%
Operating Margin -5.9%
Oper. Margin - 3 Yr. Avg. 10.5%
Pre-Tax Margin -25.2%
Pre-Tax Margin - 3 Yr. Avg. -4.6%
Net Profit Margin -24.9%
Net Profit Margin - 3 Yr. Avg. -5.7%
Effective Tax Rate 1.1%
Eff/ Tax Rate - 3 Yr. Avg. -22.5%
Payout Ratio 0%

VRX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VRX stock intrinsic value calculation we used $13070 million for the last fiscal year's total revenue generated by Valeant Pharmaceuticals International In. The default revenue input number comes from 2016 income statement of Valeant Pharmaceuticals International In. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our VRX stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 13.5%, whose default value for VRX is calculated based on our internal credit rating of Valeant Pharmaceuticals International In, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Valeant Pharmaceuticals International In.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of VRX stock the variable cost ratio is equal to 85.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for VRX stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.6% for Valeant Pharmaceuticals International In.

Corporate tax rate of 27% is the nominal tax rate for Valeant Pharmaceuticals International In. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the VRX stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for VRX are equal to 231.1%.

Life of production assets of 13.8 years is the average useful life of capital assets used in Valeant Pharmaceuticals International In operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for VRX is equal to 9.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $4259 million for Valeant Pharmaceuticals International In - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 347.59 million for Valeant Pharmaceuticals International In is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Valeant Pharmaceuticals International In at the current share price and the inputted number of shares is $6.5 billion.

RELATED COMPANIES Price Int.Val. Rating
Financial statements of VRX
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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