Intrinsic value of Vanda Pharmaceuticals - VNDA

Previous Close

$14.50

  Intrinsic Value

$2.44

stock screener

  Rating & Target

str. sell

-83%

Previous close

$14.50

 
Intrinsic value

$2.44

 
Up/down potential

-83%

 
Rating

str. sell

We calculate the intrinsic value of VNDA 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  32.73
  7.90
  7.61
  7.35
  7.11
  6.90
  6.71
  6.54
  6.39
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
Revenue, $m
  146
  158
  170
  182
  195
  208
  222
  237
  252
  268
  284
  301
  319
  338
  357
  377
  398
  420
  443
  468
  493
  519
  547
  576
  606
  638
  671
  706
  742
  780
  820
Variable operating expenses, $m
 
  66
  71
  76
  81
  87
  93
  99
  105
  112
  119
  126
  133
  141
  149
  158
  167
  176
  185
  195
  206
  217
  229
  241
  253
  267
  280
  295
  310
  326
  343
Fixed operating expenses, $m
 
  110
  112
  115
  118
  121
  124
  127
  130
  134
  137
  140
  144
  148
  151
  155
  159
  163
  167
  171
  175
  180
  184
  189
  194
  198
  203
  208
  214
  219
  224
Total operating expenses, $m
  165
  176
  183
  191
  199
  208
  217
  226
  235
  246
  256
  266
  277
  289
  300
  313
  326
  339
  352
  366
  381
  397
  413
  430
  447
  465
  483
  503
  524
  545
  567
Operating income, $m
  -19
  -18
  -14
  -9
  -5
  0
  5
  11
  16
  22
  28
  35
  42
  49
  57
  65
  73
  82
  91
  101
  111
  122
  134
  146
  159
  173
  187
  202
  218
  235
  253
EBITDA, $m
  -7
  -10
  -5
  0
  6
  11
  17
  23
  30
  36
  43
  51
  59
  67
  75
  85
  94
  104
  115
  126
  137
  150
  163
  177
  191
  206
  223
  240
  257
  276
  296
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  3
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
Earnings before tax, $m
  -18
  -18
  -13
  -9
  -5
  0
  5
  10
  16
  21
  27
  33
  40
  47
  54
  62
  70
  79
  88
  97
  107
  118
  129
  141
  153
  166
  180
  195
  211
  227
  244
Tax expense, $m
  0
  0
  0
  0
  0
  0
  1
  3
  4
  6
  7
  9
  11
  13
  15
  17
  19
  21
  24
  26
  29
  32
  35
  38
  41
  45
  49
  53
  57
  61
  66
Net income, $m
  -18
  -18
  -13
  -9
  -5
  0
  4
  7
  11
  16
  20
  24
  29
  34
  40
  45
  51
  57
  64
  71
  78
  86
  94
  103
  112
  122
  132
  142
  154
  166
  178

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  141
  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
  210
  74
  80
  86
  92
  98
  105
  112
  119
  127
  134
  142
  151
  160
  169
  178
  188
  199
  210
  221
  233
  245
  258
  272
  286
  301
  317
  333
  351
  369
  388
Adjusted assets (=assets-cash), $m
  69
  74
  80
  86
  92
  98
  105
  112
  119
  127
  134
  142
  151
  160
  169
  178
  188
  199
  210
  221
  233
  245
  258
  272
  286
  301
  317
  333
  351
  369
  388
Revenue / Adjusted assets
  2.116
  2.135
  2.125
  2.116
  2.120
  2.122
  2.114
  2.116
  2.118
  2.110
  2.119
  2.120
  2.113
  2.113
  2.112
  2.118
  2.117
  2.111
  2.110
  2.118
  2.116
  2.118
  2.120
  2.118
  2.119
  2.120
  2.117
  2.120
  2.114
  2.114
  2.113
Average production assets, $m
  39
  42
  45
  48
  51
  55
  59
  63
  67
  71
  75
  80
  84
  89
  94
  100
  105
  111
  117
  123
  130
  137
  144
  152
  160
  168
  177
  186
  196
  206
  217
Working capital, $m
  124
  -18
  -20
  -21
  -23
  -24
  -26
  -27
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -44
  -46
  -49
  -51
  -54
  -57
  -60
  -63
  -67
  -70
  -74
  -78
  -82
  -86
  -91
  -95
Total debt, $m
  0
  -12
  -7
  -2
  4
  10
  16
  22
  28
  35
  42
  49
  57
  65
  73
  81
  90
  100
  110
  120
  131
  142
  154
  166
  179
  192
  206
  221
  237
  253
  270
Total liabilities, $m
  79
  67
  72
  77
  83
  89
  95
  101
  107
  114
  121
  128
  136
  144
  152
  160
  169
  179
  189
  199
  210
  221
  233
  245
  258
  271
  285
  300
  316
  332
  349
Total equity, $m
  131
  7
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  33
  35
  37
  39
Total liabilities and equity, $m
  210
  74
  80
  86
  92
  99
  106
  112
  119
  127
  134
  142
  151
  160
  169
  178
  188
  199
  210
  221
  233
  246
  259
  272
  287
  301
  317
  333
  351
  369
  388
Debt-to-equity ratio
  0.000
  -1.610
  -0.860
  -0.190
  0.420
  0.980
  1.480
  1.940
  2.370
  2.760
  3.120
  3.450
  3.760
  4.050
  4.320
  4.570
  4.800
  5.020
  5.230
  5.420
  5.610
  5.780
  5.940
  6.100
  6.240
  6.380
  6.510
  6.630
  6.750
  6.860
  6.960
Adjusted equity ratio
  -0.145
  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
  -18
  -18
  -13
  -9
  -5
  0
  4
  7
  11
  16
  20
  24
  29
  34
  40
  45
  51
  57
  64
  71
  78
  86
  94
  103
  112
  122
  132
  142
  154
  166
  178
Depreciation, amort., depletion, $m
  12
  8
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  34
  35
  37
  39
  41
  43
Funds from operations, $m
  -19
  -10
  -4
  1
  6
  11
  15
  20
  25
  30
  35
  40
  46
  52
  59
  65
  72
  80
  87
  96
  104
  113
  123
  133
  144
  155
  167
  180
  193
  207
  222
Change in working capital, $m
  -11
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
Cash from operations, $m
  -8
  -8
  -3
  2
  7
  13
  17
  22
  26
  31
  37
  42
  48
  54
  61
  68
  75
  82
  90
  98
  107
  117
  126
  137
  147
  159
  171
  184
  197
  211
  226
Maintenance CAPEX, $m
  0
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
New CAPEX, $m
  -1
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
Cash from investing activities, $m
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -17
  -18
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -29
  -32
  -33
  -34
  -37
  -38
  -40
  -43
  -44
  -47
  -49
  -52
Free cash flow, $m
  -18
  -19
  -14
  -10
  -6
  -1
  2
  6
  10
  14
  18
  23
  28
  33
  38
  43
  49
  55
  62
  69
  76
  84
  92
  100
  109
  119
  129
  139
  150
  162
  174
Issuance/(repayment) of debt, $m
  0
  -12
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  16
  16
  17
Issuance/(repurchase) of shares, $m
  8
  35
  14
  10
  5
  1
  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 from financing (excl. dividends), $m  
  8
  23
  19
  15
  11
  7
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  16
  16
  17
Total cash flow (excl. dividends), $m
  -10
  4
  5
  5
  5
  5
  8
  12
  16
  21
  25
  30
  35
  40
  46
  52
  58
  65
  72
  79
  87
  95
  103
  112
  122
  132
  143
  154
  166
  178
  191
Retained Cash Flow (-), $m
  2
  -35
  -14
  -10
  -5
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
Prev. year cash balance distribution, $m
 
  141
  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
 
  110
  -9
  -5
  0
  4
  8
  12
  16
  20
  25
  29
  34
  40
  45
  51
  57
  64
  71
  78
  85
  94
  102
  111
  120
  130
  141
  152
  164
  176
  190
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  105
  -9
  -4
  0
  3
  6
  8
  10
  11
  13
  14
  15
  15
  15
  15
  15
  14
  13
  12
  11
  10
  8
  7
  6
  5
  4
  3
  3
  2
  1
Current shareholders' claim on cash, %
  100
  50.0
  36.4
  29.4
  26.2
  25.9
  25.9
  25.9
  25.9
  25.9
  25.9
  25.9
  25.9
  25.9
  25.9
  25.9
  25.9
  25.9
  25.9
  25.9
  25.9
  25.9
  25.9
  25.9
  25.9
  25.9
  25.9
  25.9
  25.9
  25.9
  25.9

Vanda Pharmaceuticals Inc. is a biopharmaceutical company. The Company is focused on the development and commercialization of therapies to address unmet medical needs. Its product portfolio includes HETLIOZ (tasimelteon), Fanapt (iloperidone), Tradipitant (VLY-686), Trichostatin A and AQW051. It offers HETLIOZ for the treatment of Non-24-Hour Sleep-Wake Disorder (Non-24). HETLIOZ is in clinical development for the treatment of Pediatric Non-24, Jet Lag Disorder and Smith-Magenis Syndrome. It offers Fanapt for the treatment of schizophrenia. Fanapt has potential utility in various other disorders. Tradipitant is a small molecule neurokinin-1 receptor (NK-1R) antagonist, which is in clinical development for the treatment of chronic pruritus in atopic dermatitis. Trichostatin A is a small molecule histone deacetylase (HDAC) inhibitor. AQW051 is a Phase II alpha-7 nicotinic acetylcholine receptor partial agonist. AQW051 is indicated for the treatment of central nervous system disorders.

FINANCIAL RATIOS  of  Vanda Pharmaceuticals (VNDA)

Valuation Ratios
P/E Ratio -35.4
Price to Sales 4.4
Price to Book 4.9
Price to Tangible Book
Price to Cash Flow -79.8
Price to Free Cash Flow -70.9
Growth Rates
Sales Growth Rate 32.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -66.7%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -8.5%
Ret/ On Assets - 3 Yr. Avg. -5.5%
Return On Total Capital -13.6%
Ret/ On T. Cap. - 3 Yr. Avg. -7.1%
Return On Equity -13.6%
Return On Equity - 3 Yr. Avg. -7.1%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 82.9%
Gross Margin - 3 Yr. Avg. 86.4%
EBITDA Margin -4.1%
EBITDA Margin - 3 Yr. Avg. 6.1%
Operating Margin -13%
Oper. Margin - 3 Yr. Avg. -3.1%
Pre-Tax Margin -12.3%
Pre-Tax Margin - 3 Yr. Avg. -2.9%
Net Profit Margin -12.3%
Net Profit Margin - 3 Yr. Avg. -2.9%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

VNDA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VNDA stock intrinsic value calculation we used $146 million for the last fiscal year's total revenue generated by Vanda Pharmaceuticals. The default revenue input number comes from 2016 income statement of Vanda Pharmaceuticals. 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 VNDA stock valuation model: a) initial revenue growth rate of 7.9% 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 4.3%, whose default value for VNDA is calculated based on our internal credit rating of Vanda Pharmaceuticals, 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 Vanda Pharmaceuticals.
    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 VNDA stock the variable cost ratio is equal to 41.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $107 million in the base year in the intrinsic value calculation for VNDA 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 3.5% for Vanda Pharmaceuticals.

Corporate tax rate of 27% is the nominal tax rate for Vanda Pharmaceuticals. 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 VNDA 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 VNDA are equal to 26.4%.

Life of production assets of 3.2 years is the average useful life of capital assets used in Vanda Pharmaceuticals 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 VNDA is equal to -11.6%. 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 - $131 million for Vanda Pharmaceuticals - 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 45.371 million for Vanda Pharmaceuticals 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 Vanda Pharmaceuticals at the current share price and the inputted number of shares is $0.7 billion.

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COMPANY NEWS

▶ Vanda reports 3Q loss   [Nov-07-17 05:14PM  Associated Press]
▶ Vanda to Present Scientific Posters at World Sleep 2017   [Sep-29-17 01:00PM  PR Newswire]
▶ Is It Too Late To Buy Vanda Pharmaceuticals Inc (VNDA)?   [Sep-14-17 10:25AM  Simply Wall St.]
▶ Vanda Pharmaceuticals preps for jet lag study results later this year   [Aug-04-17 04:29PM  American City Business Journals]
▶ Vanda reports 2Q loss   [Aug-02-17 05:41PM  Associated Press]
▶ Vanda Pharmaceuticals expands into cystic fibrosis, blood cancer   [May-04-17 05:09PM  American City Business Journals]
▶ Vanda reports 1Q loss   [May-02-17 06:10PM  Associated Press]
▶ Vanda reports 4Q loss   [05:26PM  Associated Press]
▶ D.C.-area biotech stocks fall on Trump's tough talk on industry   [Jan-11-17 11:10PM  at bizjournals.com]
Financial statements of VNDA
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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