Intrinsic value of Vanda Pharmaceuticals - VNDA

Previous Close

$15.70

  Intrinsic Value

$13.08

stock screener

  Rating & Target

hold

-17%

Previous close

$15.70

 
Intrinsic value

$13.08

 
Up/down potential

-17%

 
Rating

hold

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

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 0.7

 

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
  16.70
  15.53
  14.48
  13.53
  12.68
  11.91
  11.22
  10.60
  10.04
  9.53
  9.08
  8.67
  8.30
  7.97
  7.68
  7.41
  7.17
  6.95
  6.76
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
  5.76
  5.68
  5.61
  5.55
Revenue, $m
  146
  170
  197
  225
  256
  288
  323
  359
  397
  437
  478
  522
  567
  614
  663
  714
  767
  822
  879
  938
  1,000
  1,064
  1,131
  1,200
  1,273
  1,348
  1,427
  1,509
  1,595
  1,685
  1,778
Variable operating expenses, $m
 
  71
  82
  94
  107
  120
  135
  150
  166
  183
  200
  218
  237
  257
  277
  298
  320
  343
  367
  392
  418
  445
  473
  502
  532
  564
  597
  631
  667
  704
  743
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
  181
  194
  209
  225
  241
  259
  277
  296
  317
  337
  358
  381
  405
  428
  453
  479
  506
  534
  563
  593
  625
  657
  691
  726
  762
  800
  839
  881
  923
  967
Operating income, $m
  -19
  -11
  2
  16
  31
  47
  64
  82
  101
  120
  141
  163
  186
  210
  235
  260
  287
  315
  345
  375
  407
  440
  474
  510
  547
  586
  627
  670
  715
  762
  810
EBITDA, $m
  -7
  -2
  13
  28
  44
  62
  81
  101
  122
  144
  167
  191
  216
  242
  270
  298
  328
  359
  391
  424
  459
  496
  534
  573
  615
  658
  703
  750
  799
  850
  904
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  2
  2
  3
  3
  4
  4
  5
  6
  6
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
Earnings before tax, $m
  -18
  -11
  2
  16
  30
  46
  62
  80
  98
  117
  138
  159
  181
  204
  228
  253
  280
  307
  335
  365
  395
  427
  461
  496
  532
  570
  610
  652
  695
  741
  788
Tax expense, $m
  0
  0
  1
  4
  8
  12
  17
  21
  26
  32
  37
  43
  49
  55
  62
  68
  75
  83
  90
  98
  107
  115
  124
  134
  144
  154
  165
  176
  188
  200
  213
Net income, $m
  -18
  -11
  2
  12
  22
  33
  45
  58
  72
  86
  100
  116
  132
  149
  167
  185
  204
  224
  245
  266
  289
  312
  336
  362
  389
  416
  445
  476
  507
  541
  575

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
  81
  93
  106
  121
  136
  152
  170
  188
  206
  226
  247
  268
  290
  313
  337
  362
  388
  415
  443
  473
  503
  534
  567
  602
  637
  675
  713
  754
  796
  840
Adjusted assets (=assets-cash), $m
  69
  81
  93
  106
  121
  136
  152
  170
  188
  206
  226
  247
  268
  290
  313
  337
  362
  388
  415
  443
  473
  503
  534
  567
  602
  637
  675
  713
  754
  796
  840
Revenue / Adjusted assets
  2.116
  2.099
  2.118
  2.123
  2.116
  2.118
  2.125
  2.112
  2.112
  2.121
  2.115
  2.113
  2.116
  2.117
  2.118
  2.119
  2.119
  2.119
  2.118
  2.117
  2.114
  2.115
  2.118
  2.116
  2.115
  2.116
  2.114
  2.116
  2.115
  2.117
  2.117
Average production assets, $m
  39
  45
  52
  59
  68
  76
  85
  95
  105
  115
  126
  138
  150
  162
  175
  188
  202
  217
  232
  248
  264
  281
  299
  317
  336
  356
  377
  398
  421
  445
  469
Working capital, $m
  124
  -20
  -23
  -26
  -30
  -33
  -37
  -42
  -46
  -51
  -55
  -61
  -66
  -71
  -77
  -83
  -89
  -95
  -102
  -109
  -116
  -123
  -131
  -139
  -148
  -156
  -166
  -175
  -185
  -195
  -206
Total debt, $m
  0
  -7
  5
  17
  30
  44
  58
  74
  90
  107
  124
  143
  162
  182
  203
  225
  247
  270
  295
  320
  346
  374
  402
  432
  462
  495
  528
  563
  599
  638
  677
Total liabilities, $m
  79
  72
  84
  96
  109
  123
  137
  153
  169
  186
  203
  222
  241
  261
  282
  304
  326
  349
  374
  399
  425
  453
  481
  511
  541
  574
  607
  642
  678
  717
  756
Total equity, $m
  131
  8
  9
  11
  12
  14
  15
  17
  19
  21
  23
  25
  27
  29
  31
  34
  36
  39
  42
  44
  47
  50
  53
  57
  60
  64
  67
  71
  75
  80
  84
Total liabilities and equity, $m
  210
  80
  93
  107
  121
  137
  152
  170
  188
  207
  226
  247
  268
  290
  313
  338
  362
  388
  416
  443
  472
  503
  534
  568
  601
  638
  674
  713
  753
  797
  840
Debt-to-equity ratio
  0.000
  -0.810
  0.510
  1.580
  2.470
  3.200
  3.820
  4.340
  4.790
  5.170
  5.500
  5.800
  6.050
  6.280
  6.480
  6.660
  6.820
  6.970
  7.100
  7.220
  7.330
  7.430
  7.520
  7.610
  7.690
  7.760
  7.830
  7.890
  7.950
  8.010
  8.060
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
  -11
  2
  12
  22
  33
  45
  58
  72
  86
  100
  116
  132
  149
  167
  185
  204
  224
  245
  266
  289
  312
  336
  362
  389
  416
  445
  476
  507
  541
  575
Depreciation, amort., depletion, $m
  12
  9
  10
  12
  14
  15
  17
  19
  21
  23
  25
  28
  30
  32
  35
  38
  40
  43
  46
  50
  53
  56
  60
  63
  67
  71
  75
  80
  84
  89
  94
Funds from operations, $m
  -19
  -2
  12
  23
  36
  49
  62
  77
  92
  109
  126
  144
  162
  181
  202
  223
  245
  267
  291
  316
  341
  368
  396
  425
  456
  487
  521
  555
  592
  630
  669
Change in working capital, $m
  -11
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
Cash from operations, $m
  -8
  1
  15
  27
  39
  52
  66
  81
  97
  113
  131
  149
  167
  187
  207
  229
  251
  274
  298
  323
  349
  376
  404
  433
  464
  496
  530
  565
  602
  640
  680
Maintenance CAPEX, $m
  0
  -8
  -9
  -10
  -12
  -14
  -15
  -17
  -19
  -21
  -23
  -25
  -28
  -30
  -32
  -35
  -38
  -40
  -43
  -46
  -50
  -53
  -56
  -60
  -63
  -67
  -71
  -75
  -80
  -84
  -89
New CAPEX, $m
  -1
  -6
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
Cash from investing activities, $m
  -10
  -14
  -16
  -18
  -20
  -23
  -24
  -27
  -29
  -32
  -34
  -36
  -40
  -42
  -45
  -48
  -52
  -55
  -58
  -62
  -66
  -70
  -74
  -78
  -82
  -87
  -92
  -97
  -103
  -108
  -114
Free cash flow, $m
  -18
  -13
  -1
  9
  19
  30
  42
  55
  68
  82
  97
  112
  128
  145
  162
  180
  199
  219
  239
  261
  283
  306
  330
  355
  382
  409
  438
  468
  499
  532
  566
Issuance/(repayment) of debt, $m
  0
  -7
  11
  12
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  33
  35
  36
  38
  40
Issuance/(repurchase) of shares, $m
  8
  29
  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 from financing (excl. dividends), $m  
  8
  22
  11
  12
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  33
  35
  36
  38
  40
Total cash flow (excl. dividends), $m
  -10
  9
  10
  21
  32
  44
  57
  70
  84
  99
  114
  130
  147
  165
  183
  202
  222
  242
  263
  286
  309
  333
  359
  385
  412
  441
  471
  503
  536
  570
  606
Retained Cash Flow (-), $m
  2
  -29
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
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
 
  122
  9
  20
  31
  43
  55
  68
  82
  97
  112
  128
  145
  162
  180
  199
  219
  239
  261
  283
  306
  330
  355
  382
  409
  438
  468
  499
  532
  566
  602
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
 
  117
  8
  17
  25
  33
  40
  46
  51
  56
  59
  61
  62
  62
  61
  59
  56
  52
  48
  44
  39
  34
  29
  25
  21
  17
  14
  11
  8
  6
  5
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
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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 -38.4
Price to Sales 4.7
Price to Book 5.3
Price to Tangible Book
Price to Cash Flow -86.4
Price to Free Cash Flow -76.8
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 16.7% 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 44.858 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 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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