Intrinsic value of VIVUS - VVUS

Previous Close

$1.02

  Intrinsic Value

$0.04

stock screener

  Rating & Target

str. sell

-96%

  Value-price divergence*

-89%

Previous close

$1.02

 
Intrinsic value

$0.04

 
Up/down potential

-96%

 
Rating

str. sell

 
Value-price divergence*

-89%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of VVUS 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 0.1

 

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, %
  30.53
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  124
  198
  307
  458
  665
  938
  1,290
  1,732
  2,274
  2,926
  3,696
  4,589
  5,611
  6,763
  8,046
  9,461
  11,005
  12,677
  14,474
  16,392
  18,430
  20,584
  22,852
  25,232
  27,724
  30,326
  33,040
  35,866
  38,806
  41,863
  45,041
Variable operating expenses, $m
 
  326
  504
  754
  1,094
  1,544
  2,122
  2,849
  3,740
  4,813
  6,079
  7,549
  9,229
  11,125
  13,236
  15,563
  18,104
  20,854
  23,809
  26,965
  30,317
  33,860
  37,591
  41,507
  45,605
  49,886
  54,350
  58,999
  63,836
  68,865
  74,093
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
  69
  326
  504
  754
  1,094
  1,544
  2,122
  2,849
  3,740
  4,813
  6,079
  7,549
  9,229
  11,125
  13,236
  15,563
  18,104
  20,854
  23,809
  26,965
  30,317
  33,860
  37,591
  41,507
  45,605
  49,886
  54,350
  58,999
  63,836
  68,865
  74,093
Operating income, $m
  56
  -128
  -198
  -296
  -429
  -605
  -832
  -1,117
  -1,467
  -1,887
  -2,384
  -2,960
  -3,619
  -4,362
  -5,190
  -6,102
  -7,098
  -8,177
  -9,336
  -10,573
  -11,887
  -13,277
  -14,739
  -16,275
  -17,882
  -19,560
  -21,311
  -23,133
  -25,030
  -27,002
  -29,051
EBITDA, $m
  57
  -128
  -197
  -295
  -428
  -605
  -831
  -1,116
  -1,465
  -1,885
  -2,381
  -2,956
  -3,614
  -4,356
  -5,183
  -6,095
  -7,090
  -8,167
  -9,324
  -10,560
  -11,873
  -13,260
  -14,721
  -16,254
  -17,859
  -19,536
  -21,284
  -23,105
  -24,999
  -26,968
  -29,015
Interest expense (income), $m
  15
  15
  25
  41
  62
  92
  130
  180
  243
  320
  413
  523
  650
  795
  959
  1,141
  1,343
  1,562
  1,800
  2,055
  2,328
  2,618
  2,924
  3,247
  3,586
  3,940
  4,310
  4,696
  5,098
  5,516
  5,951
Earnings before tax, $m
  23
  -143
  -223
  -336
  -491
  -697
  -963
  -1,297
  -1,710
  -2,208
  -2,797
  -3,483
  -4,268
  -5,157
  -6,149
  -7,244
  -8,441
  -9,739
  -11,136
  -12,629
  -14,216
  -15,895
  -17,664
  -19,522
  -21,467
  -23,500
  -25,621
  -27,829
  -30,128
  -32,518
  -35,002
Tax expense, $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
  0
Net income, $m
  23
  -143
  -223
  -336
  -491
  -697
  -963
  -1,297
  -1,710
  -2,208
  -2,797
  -3,483
  -4,268
  -5,157
  -6,149
  -7,244
  -8,441
  -9,739
  -11,136
  -12,629
  -14,216
  -15,895
  -17,664
  -19,522
  -21,467
  -23,500
  -25,621
  -27,829
  -30,128
  -32,518
  -35,002

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  270
  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
  306
  490
  757
  1,132
  1,642
  2,317
  3,185
  4,276
  5,614
  7,224
  9,125
  11,331
  13,853
  16,698
  19,867
  23,360
  27,174
  31,302
  35,738
  40,475
  45,506
  50,824
  56,424
  62,301
  68,453
  74,879
  81,579
  88,557
  95,817
  103,366
  111,212
Adjusted assets (=assets-cash), $m
  36
  490
  757
  1,132
  1,642
  2,317
  3,185
  4,276
  5,614
  7,224
  9,125
  11,331
  13,853
  16,698
  19,867
  23,360
  27,174
  31,302
  35,738
  40,475
  45,506
  50,824
  56,424
  62,301
  68,453
  74,879
  81,579
  88,557
  95,817
  103,366
  111,212
Revenue / Adjusted assets
  3.444
  0.404
  0.406
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
Average production assets, $m
  1
  2
  2
  4
  5
  8
  10
  14
  18
  23
  30
  37
  45
  54
  64
  76
  88
  101
  116
  131
  147
  165
  183
  202
  222
  243
  264
  287
  310
  335
  360
Working capital, $m
  255
  -10
  -15
  -22
  -32
  -45
  -62
  -83
  -109
  -140
  -177
  -220
  -269
  -325
  -386
  -454
  -528
  -609
  -695
  -787
  -885
  -988
  -1,097
  -1,211
  -1,331
  -1,456
  -1,586
  -1,722
  -1,863
  -2,009
  -2,162
Total debt, $m
  241
  394
  634
  972
  1,431
  2,038
  2,820
  3,801
  5,006
  6,455
  8,165
  10,151
  12,421
  14,981
  17,833
  20,977
  24,409
  28,124
  32,117
  36,380
  40,908
  45,695
  50,734
  56,024
  61,561
  67,344
  73,374
  79,655
  86,189
  92,983
  100,044
Total liabilities, $m
  288
  441
  681
  1,019
  1,478
  2,085
  2,867
  3,848
  5,053
  6,502
  8,212
  10,198
  12,468
  15,028
  17,880
  21,024
  24,456
  28,171
  32,164
  36,427
  40,955
  45,742
  50,781
  56,071
  61,608
  67,391
  73,421
  79,702
  86,236
  93,030
  100,091
Total equity, $m
  18
  49
  76
  113
  164
  232
  319
  428
  561
  722
  912
  1,133
  1,385
  1,670
  1,987
  2,336
  2,717
  3,130
  3,574
  4,047
  4,551
  5,082
  5,642
  6,230
  6,845
  7,488
  8,158
  8,856
  9,582
  10,337
  11,121
Total liabilities and equity, $m
  306
  490
  757
  1,132
  1,642
  2,317
  3,186
  4,276
  5,614
  7,224
  9,124
  11,331
  13,853
  16,698
  19,867
  23,360
  27,173
  31,301
  35,738
  40,474
  45,506
  50,824
  56,423
  62,301
  68,453
  74,879
  81,579
  88,558
  95,818
  103,367
  111,212
Debt-to-equity ratio
  13.389
  8.040
  8.380
  8.580
  8.710
  8.800
  8.850
  8.890
  8.920
  8.930
  8.950
  8.960
  8.970
  8.970
  8.980
  8.980
  8.980
  8.980
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  9.000
  9.000
  9.000
Adjusted equity ratio
  -7.000
  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
  23
  -143
  -223
  -336
  -491
  -697
  -963
  -1,297
  -1,710
  -2,208
  -2,797
  -3,483
  -4,268
  -5,157
  -6,149
  -7,244
  -8,441
  -9,739
  -11,136
  -12,629
  -14,216
  -15,895
  -17,664
  -19,522
  -21,467
  -23,500
  -25,621
  -27,829
  -30,128
  -32,518
  -35,002
Depreciation, amort., depletion, $m
  1
  0
  0
  0
  1
  1
  1
  1
  2
  2
  3
  4
  4
  5
  6
  8
  9
  10
  12
  13
  15
  16
  18
  20
  22
  24
  26
  29
  31
  33
  36
Funds from operations, $m
  30
  -143
  -223
  -336
  -491
  -696
  -962
  -1,296
  -1,708
  -2,205
  -2,794
  -3,479
  -4,264
  -5,151
  -6,142
  -7,236
  -8,432
  -9,729
  -11,124
  -12,615
  -14,201
  -15,878
  -17,645
  -19,501
  -21,445
  -23,476
  -25,594
  -27,801
  -30,097
  -32,484
  -34,966
Change in working capital, $m
  -8
  -4
  -5
  -7
  -10
  -13
  -17
  -21
  -26
  -31
  -37
  -43
  -49
  -55
  -62
  -68
  -74
  -80
  -86
  -92
  -98
  -103
  -109
  -114
  -120
  -125
  -130
  -136
  -141
  -147
  -153
Cash from operations, $m
  38
  -140
  -217
  -329
  -481
  -683
  -945
  -1,275
  -1,682
  -2,174
  -2,757
  -3,436
  -4,215
  -5,096
  -6,081
  -7,168
  -8,358
  -9,649
  -11,038
  -12,523
  -14,103
  -15,775
  -17,537
  -19,387
  -21,325
  -23,351
  -25,464
  -27,665
  -29,956
  -32,338
  -34,814
Maintenance CAPEX, $m
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -2
  -2
  -3
  -4
  -4
  -5
  -6
  -8
  -9
  -10
  -12
  -13
  -15
  -16
  -18
  -20
  -22
  -24
  -26
  -29
  -31
  -33
New CAPEX, $m
  0
  -1
  -1
  -1
  -2
  -2
  -3
  -4
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -24
  -25
Cash from investing activities, $m
  -40
  -1
  -1
  -1
  -2
  -3
  -4
  -5
  -5
  -7
  -8
  -10
  -12
  -13
  -15
  -17
  -20
  -22
  -24
  -27
  -29
  -32
  -34
  -37
  -40
  -43
  -46
  -49
  -53
  -55
  -58
Free cash flow, $m
  -2
  -140
  -219
  -330
  -483
  -686
  -948
  -1,279
  -1,688
  -2,181
  -2,765
  -3,446
  -4,227
  -5,110
  -6,096
  -7,186
  -8,378
  -9,671
  -11,062
  -12,550
  -14,132
  -15,807
  -17,571
  -19,424
  -21,366
  -23,394
  -25,510
  -27,714
  -30,008
  -32,393
  -34,873
Issuance/(repayment) of debt, $m
  -9
  153
  240
  338
  459
  607
  782
  981
  1,205
  1,449
  1,711
  1,986
  2,270
  2,560
  2,852
  3,144
  3,432
  3,715
  3,993
  4,263
  4,528
  4,786
  5,040
  5,290
  5,537
  5,783
  6,030
  6,280
  6,534
  6,794
  7,061
Issuance/(repurchase) of shares, $m
  0
  174
  250
  374
  542
  764
  1,049
  1,406
  1,844
  2,369
  2,987
  3,703
  4,521
  5,441
  6,466
  7,593
  8,822
  10,152
  11,579
  13,102
  14,719
  16,426
  18,224
  20,109
  22,082
  24,143
  26,291
  28,527
  30,854
  33,273
  35,787
Cash from financing (excl. dividends), $m  
  -9
  327
  490
  712
  1,001
  1,371
  1,831
  2,387
  3,049
  3,818
  4,698
  5,689
  6,791
  8,001
  9,318
  10,737
  12,254
  13,867
  15,572
  17,365
  19,247
  21,212
  23,264
  25,399
  27,619
  29,926
  32,321
  34,807
  37,388
  40,067
  42,848
Total cash flow (excl. dividends), $m
  -11
  187
  271
  381
  519
  686
  883
  1,108
  1,361
  1,637
  1,932
  2,243
  2,564
  2,892
  3,222
  3,551
  3,876
  4,196
  4,510
  4,815
  5,114
  5,406
  5,692
  5,974
  6,254
  6,532
  6,811
  7,093
  7,380
  7,674
  7,976
Retained Cash Flow (-), $m
  -25
  -174
  -250
  -374
  -542
  -764
  -1,049
  -1,406
  -1,844
  -2,369
  -2,987
  -3,703
  -4,521
  -5,441
  -6,466
  -7,593
  -8,822
  -10,152
  -11,579
  -13,102
  -14,719
  -16,426
  -18,224
  -20,109
  -22,082
  -24,143
  -26,291
  -28,527
  -30,854
  -33,273
  -35,787
Prev. year cash balance distribution, $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 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
 
  13
  22
  7
  -23
  -78
  -167
  -298
  -483
  -732
  -1,055
  -1,461
  -1,957
  -2,550
  -3,244
  -4,042
  -4,946
  -5,955
  -7,070
  -8,287
  -9,605
  -11,020
  -12,531
  -14,135
  -15,829
  -17,611
  -19,479
  -21,434
  -23,474
  -25,599
  -27,811
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
 
  12
  20
  6
  -19
  -61
  -121
  -201
  -302
  -420
  -553
  -694
  -835
  -969
  -1,089
  -1,187
  -1,257
  -1,296
  -1,302
  -1,276
  -1,220
  -1,140
  -1,040
  -926
  -806
  -685
  -568
  -460
  -363
  -279
  -209
Current shareholders' claim on cash, %
  100
  38.0
  20.5
  11.2
  6.2
  3.5
  2.0
  1.1
  0.7
  0.4
  0.2
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

VIVUS, Inc., a biopharmaceutical company, develops and commercializes therapies to address unmet medical needs in the United States and the European Union. The company offers Qsymia for the treatment of obesity as an adjunct to a reduced-calorie diet and increased physical activity for chronic weight management in adult patients with an initial body mass index of 30 or greater, or 27 or greater in the presence of at least one weight-related comorbidity, such as hypertension, type 2 diabetes mellitus or high cholesterol; and STENDRA, an oral phosphodiesterase type 5 inhibitor for the treatment of erectile dysfunction. It is also developing Qsymia, which has completed Phase II studies for the treatment of obstructive sleep apnea and diabetes, as well as for other obesity-related diseases, including nonalcoholic steatohepatitis, nonalcoholic fatty liver disease, hyperlipidemia, and hypertension. The company has development, license and clinical trial, and commercial supply agreement with Mitsubishi Tanabe Pharma Corporation for the development and commercialization of avanafil, a PDE5 inhibitor compound for the oral and local treatment of male and female sexual dysfunction. It also has license and commercialization agreements with Berlin-Chemie AG and Auxilium Pharmaceuticals, Inc. to commercialize and promote SPEDRA; and with Sanofi Winthrop Industrie to commercialize and promote avanafil. VIVUS, Inc. was founded in 1991 and is headquartered in Mountain View, California.

FINANCIAL RATIOS  of  VIVUS (VVUS)

Valuation Ratios
P/E Ratio 4.7
Price to Sales 0.9
Price to Book 5.9
Price to Tangible Book
Price to Cash Flow 2.8
Price to Free Cash Flow 2.8
Growth Rates
Sales Growth Rate 30.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio 30
Current Ratio 0
LT Debt to Equity 1288.9%
Total Debt to Equity 1338.9%
Interest Coverage 3
Management Effectiveness
Return On Assets 13%
Ret/ On Assets - 3 Yr. Avg. -8.6%
Return On Total Capital 9.5%
Ret/ On T. Cap. - 3 Yr. Avg. -16.6%
Return On Equity 418.2%
Return On Equity - 3 Yr. Avg. 34.4%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 91.9%
Gross Margin - 3 Yr. Avg. 75.7%
EBITDA Margin 31.5%
EBITDA Margin - 3 Yr. Avg. -33.3%
Operating Margin 44.4%
Oper. Margin - 3 Yr. Avg. -21.5%
Pre-Tax Margin 18.5%
Pre-Tax Margin - 3 Yr. Avg. -50.7%
Net Profit Margin 18.5%
Net Profit Margin - 3 Yr. Avg. -50.7%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

VVUS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VVUS stock intrinsic value calculation we used $124 million for the last fiscal year's total revenue generated by VIVUS. The default revenue input number comes from 2016 income statement of VIVUS. 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 VVUS stock valuation model: a) initial revenue growth rate of 60% 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 VVUS is calculated based on our internal credit rating of VIVUS, 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 VIVUS.
    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 VVUS stock the variable cost ratio is equal to 164.5%.

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 VVUS 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 6.4% for VIVUS.

Corporate tax rate of 27% is the nominal tax rate for VIVUS. 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 VVUS 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 VVUS are equal to 0.8%.

Life of production assets of 10 years is the average useful life of capital assets used in VIVUS 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 VVUS is equal to -4.8%. 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 - $18 million for VIVUS - 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 104.842 million for VIVUS 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 VIVUS at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ VIVUS Reports Second Quarter 2017 Financial Results   [Aug-03-17 04:15PM  Marketwired]
▶ ETFs with exposure to VIVUS, Inc. : May 30, 2017   [May-30-17 12:50PM  Capital Cube]
▶ Thomas B. King Joins VIVUS' Board of Directors   [May-24-17 04:15PM  Marketwired]
Stock chart of VVUS Financial statements of VVUS
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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